DOT/FAA/AR-02/122 Practices and Perspectives in

Office of Aviation Research

Washington, D.C. 20591
Outsourcing Aircraft Maintenance

March 2003

Final Report

This document is available to the U.S. public

through the National Technical Information
Service (NTIS), Springfield, Virginia 22161.

U.S. Department of Transportation

Federal Aviation Administration
 NOTICE

This document is disseminated under the sponsorship of the U.S.

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 Technical Report Documentation Page
1. Report No. 2. Government Accession No. 3. Recipient's Catalog No.

DOT/FAA/AR-02/122
4. Title and Subtitle 5. Report Date

PRACTICES AND PERSPECTIVES IN OUTSOURCING AIRCRAFT March 2003

6. Performing Organization Code
MAINTENANCE

7. Author(s) 8. Performing Organization Report No.

Mr. Edward Czepiel

9. Performing Organization Name and Address 10. Work Unit No. (TRAIS)

Transportation Center
Northwestern University
11. Contract or Grant No.
600 Foster Street
Evanston, IL 60208-4055 99-G-007
12. Sponsoring Agency Name and Address 13. Type of Report and Period Covered

U.S. Department of Transportation Final Report

Federal Aviation Administration
14. Sponsoring Agency Code
Office of Aviation Research
Washington, DC 20591 AFS-300, AFS-900
15. Supplementary Notes

The FAA William J. Hughes Technical Center Technical Monitor was John Lapointe.
16. Abstract

The objective of this study was to identify the most common criteria that airlines use to select, monitor, and assess the
performance of third-party maintenance facilities. These criteria formed the basis to develop performance measures and risk
indicators for the operation of aviation maintenance repair stations. In particular, this study focused on outsourcing of major
maintenance to larger repair stations.

A limited data collection effort was conducted by interviewing representatives from both airlines and repair stations, primarily in
their respective quality assurance departments.

The most important measures and risk indicators are grouped into three areas. The most important measures for repair station
capabilities include training of employees, experience level of employees, and tools and test equipment of the repair station. The
most important measures for repair station performance include audit procedures, ability to meet turn times, number of work
discrepancies, suspected unapproved part(s) infractions, and certification infractions of the repair station. The most important
measures for repair station administration include the financial status of the repair station and change in management of the repair
station.

17. Key Words 18. Distribution Statement

Aircraft maintenance, Repair station, Maintenance, Repair and This document is available to the public through the National
overhaul, Performance measures, Outsourcing Technical Information Service (NTIS) Springfield, Virginia
22161.
19. Security Classif. (of this report) 20. Security Classif. (of this page) 21. No. of Pages 22. Price

Unclassified Unclassified 68
Form DOT F1700.7 (8-72) Reproduction of completed page authorized
 TABLE OF CONTENTS

Page

EXECUTIVE SUMMARY vii

1. INTRODUCTION 1-1

1.1 Background 1-1

1.2 Objectives 1-1
1.3 Approach 1-2
1.4 Overview of Report 1-3

2. LITERATURE REVIEW 2-1

2.1 Trends in Outsourcing 2-1

2.2 Types of Repair Stations 2-3
2.3 Issues Facing Repair Stations 2-4

2.3.1 Shortage of Labor 2-4

2.3.2 Spare Parts Regulations 2-5
2.3.3 Revisions to Repair Station Regulations 2-6
2.3.4 Regulations Affecting Code Sharing With Foreign Airlines 2-7

2.4 Other Related Research Efforts 2-7

2.4.1 Why Outsource 2-8

2.4.2 Outsourcing Process 2-8
2.4.3 Training and Qualifications 2-10

3. RESEARCH METHODOLOGY 3-1

3.1 Interview Development 3-1

3.2 Protocol 3-2
3.3 Analysis 3-3
3.4 Performance Measures 3-3
3.5 Validation 3-3

4. ANALYSIS OF AIRLINE INTERVIEW RESULTS 4-1

4.1 Introduction 4-1

4.2 Description of Airlines Interviewed 4-1
4.3 Background Information 4-1
4.4 Criteria for Third-Party Vendors 4-4
4.5 Monitoring and Assessing Vendor Performance 4-7
4.6 Oversight by Other Entities 4-8

iii
5. ANALYSIS OF REPAIR STATION INTERVIEWS 5-1

5.1 Introduction 5-1

5.2 Description and Structure of Repair Stations Interviewed 5-1
5.3 Labor and Management Issues 5-1
5.4 Certification and Regulatory Issues 5-3
5.5 Relationships With Clients 5-4
5.6 Use of Subcontractors 5-4
5.7 Quality Control Issues 5-5

6. DEVELOPMENT OF RISK INDICATORS AND PERFORMANCE MEASURES 6-1

6.1 Introduction 6-1

6.2 Identification of Risk Indicator and Performance Measures for Repair

Station Operation 6-1

6.2.1 Capabilities of Repair Station Operation 6-1

6.2.2 Performance of Repair Station Operation 6-2
6.2.3 Performance of Repair Station Administration 6-3

6.3 Identification of Performance Measures for Airlines With Major Contracts

With Repair Stations 6-4

7. SUMMARY AND CONCLUSIONS 7-1

8. REFERENCES 8-1

9. BIBLIOGRAPHY 9-1

APPENDICES

A—Interview Outlines
B—FAR Part 145 References

iv
 LIST OF FIGURES

Figures Page

2-1 Maintenance Performed In-House Process Diagram 2-8

2-2 Maintenance Outsourced Process Diagram 2-9
4-1 Factors Considered When Making Outsourcing Decisions 4-2
4-2 Typical Maintenance Functions Outsourced 4-2
4-3 Types of Outsourcing Providers 4-3
4-4 Limitations on Outsourcing 4-4
4-5 Methods Used to Identify Potential Maintenance Providers 4-4
4-6 Respondents That Consult the PMI of a Potential Provider 4-5
4-7 Workforce Considerations for Repair Stations 4-6
4-8 Company Personnel On-Site at a Vendor 4-7
5-1 Workforce per Inspector at Repair Stations 5-2
5-2 Reported Average Wage per Hour 5-3

LIST OF TABLES

Tables Page

2-1 Changes in Outsourced Maintenance Expenditures of the Ten Major U.S.

Air Carriers 2-2

2-2 Maintenance Expenditures of the Ten Major U.S. Air Carriers 2-2

6-1 Performance Measures for Repair Station Capabilities 6-2

6-2 Performance Measures for Repair Station Performance 6-3

6-3 Performance Measures for Repair Station Administration 6-4

6-4 Performance Measures for Airlines With Major Contracts With Repair Stations 6-5

v
 LIST OF ACRONYMS

A&P Airframe and Powerplant Certificate

AC Advisory Circular
AMT Aviation Maintenance Technician
ASI Aviation Safety Inspector
ATOS Air Transportation Oversight System
CASE Coordinating Agency for Supplier Evaluations
CFR Code of Federal Regulations
DoD Department of Defense
DOT Department of Transportation
FAA Federal Aviation Administration
FAR Federal Aviation Regulation
FBO Fixed Base Operator
FSDO Flight Standards District Office
GA General Aviation
GAMCO Gulf Aircraft Manufacturing Company
GAO General Accounting Office
GMM General Maintenance Manual
ICAO International Civil Aviation Organization
JAA Joint Aviation Authorities
MRO Maintenance, Repair, and Overhaul
NPRM Notice of Proposed Rule Making
NTSB National Transportation Safety Board
OEM Original Equipment Manufacturer
OSHA Occupational Safety and Health Administration
P&W Pratt & Whitney
PMA Part Manufacturer Approval
PMI Principal Maintenance Inspector
RFP Request for proposal
SUPs Suspect unapproved parts

vi
 EXECUTIVE SUMMARY

The objective of the study was to identify the most common criteria that airlines use to select,
monitor, and assess the performance of third-party maintenance facilities. These criteria formed
the basis to develop performance measures and risk indicators for the operation of aviation
maintenance repair stations. In particular, this study focused on outsourcing of major
maintenance to larger repair stations.

A limited data collection effort was conducted by interviewing representatives from both airlines
and repair stations, primarily in their respective quality assurance departments. In interviews
with airlines, information was sought about the criteria the airline use for selecting repair stations
and how the airlines monitor and assess vendor performance. Repair station interviews focused
on information about labor, management, and certification issues; quality control and assurance
functions; and use of subcontractors. Responses from these interviews formed the basis for
developing risk indicators and performance measures for repair station operation.

Ten airline interviews were conducted, which included respondents from United States major,
regional, and cargo airlines. In addition, select questions were asked of a major international
carrier. The most frequently outsourced tasks included engine maintenance and component
overhaul. Cost savings was the motivating factor in the decision to outsource, a decision which
takes into consideration the personnel, training, and tools and test equipment necessary to
complete the maintenance task. However, a cost savings is only realized if the repair station
performance is satisfactory. Larger contracts require airline personnel on-site at the repair
station to act as a resource and ensure timely and satisfactory completion of the work.

Six representatives from repair stations were interviewed. These included three component
overhaul facilities and three nose-to-tail facilities. Three of these facilities are original
equipment manufacturers—two of the facilities are independent and one of the facilities is a
subsidiary of a regional airline. Certification of maintenance personnel at the repair stations
interviewed varied from 20%-90% of the total maintenance workforce. Temporary or contract
maintenance personnel were used at half of the repair stations in the sample to even out surges in
the workload or as a trial period before permanent hire. Most respondents said that contracted
labor should comprise no more than 20% of the workforce, though some respondents did exceed
that guideline on occasion. It was not standard practice to inform a client that a subcontractor
was used; however, such an arrangement would be reflected in the client’s paperwork. The
respondents reported that they were audited by a number of agencies and their clients with
varying frequency.

Using the analysis as a basis, risk indicators and performance measures were developed as
variables within certain areas of repair station operations that the respondents stated they
monitored. In addition, a subset of the respondents rated each of these measures in terms of
relative criticality. The measures are grouped into three categories.

1. Repair station capability refers to the capability of a repair station to offer certain
services. The most important measures of capability include training of employees,
experience level of employees, and tools and test equipment of the repair station.

vii
2. Repair station performance refers to the quality of work that is actually performed. The
most important measures of performance include audit procedures, ability to meet
turntimes, the number of work discrepancies, suspect unapproved parts infractions, and
certification infractions.

3. Repair station administration refers to the overall organization and operation of the
facility. The most important measures of administration include the financial status of
the repair station and the number of changes in management.

viii
1. INTRODUCTION.

1.1 BACKGROUND.

Airlines and lessors often rely on third-party aircraft maintenance providers to perform a variety
of maintenance tasks. The work that is outsourced varies widely in scale and in scope. Such
tasks may be servicing a particular component, overhauling an engine, or performing a D-check
for an entire fleet of aircraft.

Outsourcing is an attractive option for operators for a number of reasons. For example, an
operator may not have a sufficient number of aircraft in a particular fleet type to justify the
expense of trained personnel, facilities, tooling and test equipment required to perform the
maintenance function internally. In this situation, substantial savings are realized when
maintenance is performed externally. An outside vendor will usually have multiple contracts and
the larger density of work allows the vendor to complete such tasks at a lower cost to the
operator. In other instances, an outside vendor may be able to complete a particular task more
quickly than if it was performed by the operator due to staffing constraints at the airline.

Due to a perceived increase in demand for third-party maintenance services, the number of
vendors continues to grow. A 1997 General Accounting Office (GAO) report estimated that
one-half of the maintenance performed by United States airlines is actually outsourced to repair
stations, creating an extremely competitive environment within the third party aviation
maintenance industry. While cost savings may be the initial motivation to outsource, many other
factors are evaluated. For example, the quality of the work performed is a significant
consideration in the selection of a vendor. Poor quality of maintenance and repair could result in
decreased reliability of the aircraft, which in turn quickly erodes any cost savings gained by
outsourcing.

When a task is performed by a third-party maintenance facility, the operator of the aircraft is still
responsible for compliance of the vendor with respect to the operator’s approved policies,
procedures, and requirements. As a result, Federal Aviation Administration (FAA) oversight of
the operator will include the repair station that completes work for the operator. Oversight of the
outsourcing process has become an increasing concern in light of the ValuJet accident of May
1996. In response to this incident, the FAA has created several initiatives to improve the
oversight of repair stations. One specific action was to improve the information and data
collected from both operators and repair stations in relation to outsourcing.

1.2 OBJECTIVES.

To better understand the process of outsourcing maintenance and its implications for the FAA
and the air transport community, the Transportation Center at Northwestern University examined
the criteria for the selection and qualification of third-party maintenance facilities by the major
airlines. This objective was accomplished by interviewing representatives from maintenance
departments at major, niche, and regional airlines. To provide a balanced perspective,
representatives from a sample of larger repair stations were also interviewed. Based on the
results of the interviews, prototype performance measures and risk indicators for repair stations
were identified.

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The objective of this study was two-fold. The interviews sought to uncover the data and
information that is currently collected by operators of aircraft and to identify areas in which the
data is insufficient. Second, the performance measures and risk indicators defined provided a
basis for describing the characteristics of a repair station. Collectively, these two outcomes will
provide additional insight into the outsourcing process.

1.3 APPROACH.

An interview process provided the primary means of gathering information and data for this
study. Representatives from both repair stations and airlines were interviewed to provide a
balanced perspective on the outsourcing process. A separate set of questions was developed for
the airline and repair station interviews respectively.

Four broad areas were investigated as part of the airline interviews:

• Background information. This section seeks to gain background information about the
airline with which the respondent is associated.

• Criteria for third-party vendors. This section focuses on how airlines identify potential
vendors, the requirements of both the airline and the vendor for each other, and how
contracts are awarded.

• Monitoring and assessing vendor performance. This section focuses on what an airline
monitors in terms of vendor performance and how that is completed.

• Oversight by other entities. The questions in this section seek information regarding the
airline’s relationship with Coordinating Agency for Supplier Evaluations (CASE),
industry groups, and the FAA.

Six broad areas were investigated in the repair station interviews:

• Background Information. This section seeks information about the repair station for
which the respondent is employed.

• Labor and Management Issues. This section focuses on the organization of the repair
station and staffing and personnel issues related to the maintenance workforce.

• Certification/Regulatory Issues. The questions in this section focus on how the repair
station ensures compliance with both FAA and client requirements and seek reaction to
the proposed changes to Title 14 of the Code of Federal Regulations (14 CFR) Part 145.

• Relationship with Clients. This section seeks information regarding how contracts are
managed with the clients and what information flows between the two entities.

• Use of Subcontractors. This section seeks information about the process and practices of
repair stations using subcontractors to complete work.

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• Quality Control Issue. The questions in this section focus on how quality control is
maintained for clients in the repair station environment.

1.4 OVERVIEW OF REPORT.

This report details the research activities conducted as part of the Practices and Perspectives in
Outsourcing Aircraft Maintenance study (FAA grant 99-G-007). Section 2, Literature Review,
provides references to other studies and various literature, both academic and trade, related to
topics in outsourcing aircraft maintenance. Section 3, Research Methodology, details the
development of the interviews of both the airlines and the repair stations and the corresponding
protocols in administering the interviews. Sections 4 and 5, Analysis of Airline Interview
Results and Analysis of Repair Station Interview Results, report the data that has been collected
as part of the interview process and the subsequent analysis. The analysis forms the basis for
performance measures that are discussed in Section 6, Development of Performance Measures.
Finally, Section 7, Summary and Conclusions, lists the major findings of the report.

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2. LITERATURE REVIEW.

Aircraft maintenance encompasses a broad set of activities that must be performed so that an
aircraft remains in a condition of airworthiness. These activities are commonly referred to as
maintenance, repair, and overhaul (MRO) to include a complex blend of preventive scheduled
and unscheduled work, as well as major refurbishments that return aircrafts and aircraft
subsystems as closely as possible to their original condition. Planning and coordinating of
aircraft MRO tasks is complicated because each aircraft has more than a million serviceable
parts. Subject to the type of operations, these parts of a same type aircraft, i.e., B-737, may have
different service intervals as measured by flight hours, flight cycles, or calendar periods. MRO
of airframes, engines, and other systems and components requires a wide range of tools and
equipment, training and skills, and spare parts. As a result, a growing trend within the airline
industry is to outsource maintenance tasks to vendors who, through economies of scale and gains
achieved through specialization in fleet types and maintenance procedures, can benefit in cost
and expertise.

The following sections describe the current trends in the airline maintenance outsourcing
industry, exploring airline perspectives, and the regulations that govern the industry. Source
documents for this review consist primarily of industry periodicals appearing from 1997 to the
present, as well as two GAO reports “FAA’s New Inspection System Offers Promise, but
Problems Need to Be Addressed” [1] and “FAA Oversight of Repair Stations Needs
Improvement” [2].

2.1 TRENDS IN OUTSOURCING.

Prior to airline deregulation in 1978, airlines performed most of their own maintenance;
however, since that time the practice of outsourcing maintenance has become widespread.
Today, it is common for airlines to perform line and light maintenance in-house to preserve
flexibility in responding to simple maintenance needs and to outsource heavy maintenance and
overhauls that require more specialized and costly equipment and training. While some airlines
continue to perform major maintenance tasks in-house, the third-party (contracting) maintenance
industry is growing. Contracting maintenance is especially attractive to smaller startup airlines,
for whom keeping a fully-equipped, fully-staffed maintenance department is often inefficient or
even infeasible.

The global MRO market is estimated to be worth between $25 billion [3] and $30 billion a
year [4]. Inventory in the airline industry’s supply chain is valued in excess of $50 billion [5].
Maintenance and spares together are often viewed as potential areas for cost-savings for airlines,
as repair stations offering to efficiently manage maintenance and spares needs.

Department of Transportation (DOT) Form 41 Financial Data indicates that the ten major U.S.
air carriers spent over $9 billion dollars on aircraft MRO in the year 2000, where more than $2.5
billion of that consisted of outsourced services. Table 2-1 shows the annual amount spent on
outsourced maintenance by the ten major U.S. air carriers between 1996 and 2000. The table
also shows that the total outsourced maintenance expenditures for these ten air carriers increased
between 1996 and 1999, and decreased slightly between 1999 and 2000. Table 2-2 shows the
proportion of outsourced maintenance relative to total maintenance expenditures for the ten

2-1
major U.S. carriers for the same time period. Table 2-2 also shows that the proportion of
maintenance expenditures allocated to outsourced services increased steadily from 24.2% in
1996 to 29.2% in 1999, but dropped slightly in 2000 to 27.7%.

TABLE 2-1. CHANGES IN OUTSOURCED MAINTENANCE EXPENDITURES OF THE

TEN MAJOR U.S. AIR CARRIERS*

Outsourced Maintenance
Expenditures
(millions of dollars) Change
1996 1,657
1997 1,901 + 14.8%
1998 2,272 + 19.5%
1999 2,569 + 13.1%
2000 2,524 - 1.8%
*The ten major U.S. air carriers include American Airlines, Alaska Airlines,
America West Airlines, Continental Airlines, Delta Airlines, Northwest Airlines,
Southwest Airlines, Trans World Airlines, United Airlines, and USAirways.

TABLE 2-2. MAINTENANCE EXPENDITURES OF THE TEN MAJOR

U.S. AIR CARRIERS*

Outsourced Maintenance Total Maintenance Proportion of Maintenance

Expenditures Expenditures Expenditures Spent on
(millions of dollars) (millions of dollars) Outsourced Services
1996 1,657 6,855 24.2%
1997 1,901 7,806 24.4%
1998 2,272 8,415 27.0%
1999 2,569 8,814 29.2%
2000 2,524 9,110 27.7%
*The ten major U.S. air carriers include American Airlines, Alaska Airlines, America West Airlines,
Continental Airlines, Delta Airlines, Northwest Airlines, Southwest Airlines, Trans World Airlines,
United Airlines, and USAirways.

In measuring the true cost of maintenance, airlines consider not only the equipment, personnel,
and parts costs of its own maintenance department, plus the cost of purchased services, but also
the operational consequences of maintenance, such as the impact of maintenance on aircraft
availability and of passenger inconvenience due to technical irregularities. Reflecting this
reality, a global survey of airlines’ MRO requirements, commissioned by Lufthansa Technik in
1997, found that airlines are not simply looking for maintenance at the lowest price, but rather
the highest value for money in terms of overall operations [6]. Appropriately, the same survey
found that the majority of airlines considered quality of work and service the most important
factor in choosing an MRO provider. Other important criteria included short turnaround time,
range and capabilities, depth of experience, and the ability to assure the highest aircraft
utilization. Cost was rated only sixth in importance.

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2.2 TYPES OF REPAIR STATIONS.

For the purposes of this discussion, three basic types of repair stations are defined: independent
repair stations, maintenance divisions of major carriers, and original equipment manufacturers
(OEMs). The basic types of maintenance services range from servicing, maintaining, or
overhauling components to complete nose-to-tail maintenance services on the entire aircraft.
This section discusses the types of maintenance providers offering heavy maintenance.

Large airlines can leverage their inventory, technical expertise, and scale to sell maintenance
services to smaller airlines. This makes use of the large airline’s spare capacity and gives
smaller airlines more maintenance options; however, this arrangement raises the concern that the
customer will be treated less favorably than the parent airline. Further, since the two airlines
may share a market and, thus, be in competition with each other, the initiation of a maintenance
relationship may represent a conflict of interest.

Airline attempts to offer third-party maintenance services were made in the U.S. in the 1980s,
and then in Europe in the 1990s. United Airlines performs a small amount of third-party work,
but is restricted by union agreements. Recently, Delta Airlines had won a number of contracts to
perform third-party maintenance.

Another complication associated with airlines offering third-party maintenance services is that
in-house and third-party maintenance are two different businesses that must be managed
separately. An airline’s ability to react to short-term problems is diminished, where the operator
is only one of many customers rather than the sole user of an in-house facility. As a result, when
maintenance divisions break off into stand-alone companies offering maintenance services to
other airlines without special consideration for their parent company, they become independent
repair stations.

OEMs are also competing for a share of the MRO market. With a slowing demand for new
transport and bleak future sales outlook, MRO, which was once an afterthought for OEMs, has
become a source of revenue. OEMs have the advantage of a skilled workforce, in-depth product
knowledge, and direct access to spare parts. Further, OEMs have the advantage of being able to
bundle aftermarket service with new product sales.

A popular trend now is for OEMs to offer multiyear service agreements. This provides airlines
with long-term contracts that enable them to know what their costs will be several years into the
future. For example, Lucas Aerospace has a 10-year agreement to service all its products with
Trans States Airlines so that the airline will not need to establish its own heavy-maintenance
facility or negotiate repair contracts with others.

OEMs have also entered joint ventures with other MRO providers to become more competitive.
For example, Rolls Royce and American Airlines forged a 50/50 partnership in 1997, giving
Rolls Royce more North American capacity and making use of American’s excess capacity.
Prior to the agreement, American’s facility could handle up to 350 engines per year but only
worked on 100 per year, where 7% of those were third-party jobs. In 1998, less than a year later,
third-party work had increased to 16% of the facility’s load and was expected to rise further to
33% in 1999. This joint venture’s third-party customers include America West Airlines,

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Midway Airlines, and Mexicana Airlines. Another successful joint venture was created when
Pratt & Whitney (P&W) Engine Services teamed with Gulf Aircraft Manufacturing Company
(GAMCO). In this arrangement, GAMCO provided the partnership with storage facilities and
received P&W parts at reduced rates.

While OEMs have the benefit of being inherently equipped in terms of tools, personnel, and
spares to service their products, they tend to be limited in the range of maintenance services they
can offer. More specifically, airlines are increasingly interested in one-stop service, preferring to
arrange for a single source for all their maintenance requirements. As such, many major carriers
have reduced their supplier base from 50 to a core of 5 to 10. Airlines are often seeking long-
term contracts and prices that enable them to control their costs; one-stop maintenance allows
them to determine this for all of their maintenance needs at once.

To remain competitive, repair stations are accommodating the airlines’ desire for convenient
one-stop service by offering a wide range of services and capabilities. For example, Lufthansa
Technik (LHT) has entered a number of liaisons and joint ventures as part of its plans to be an
even bigger player in the MRO industry. By absorbing the services and capabilities of their joint
venture partners, LHT can offer customers many different services under a single agreement.

2.3 ISSUES FACING REPAIR STATIONS.

Repair stations are currently facing several issues and challenges that could affect the quality of
the work they perform including

• shortage of qualified labor. In some cases, this has caused repair stations to rely on
temporary and uncertificated mechanics.

• changes in spare parts regulations. The definition of approved parts has been relaxed,
while quality-control requirements have increased the need for documentation and
traceability of parts.

• revision of 14 CFR Part 145. The regulation governing repair stations is currently being
revised and its changes are expected to place stricter requirements on many different
aspects of operation.

• concern on foreign repair stations that perform maintenance for code-share partners of
U.S.-based airlines.

These issues are described in more detail in the following sections.

2.3.1 Shortage of Labor.

The aircraft MRO industry is facing a critical shortage of qualified personnel to perform hands-
on tasks, as well as managers to supervise the technical workforce [7]. George Ebbs, president
of Embry Riddle Aeronautical University, has warned that the number of trained and
experienced aircraft technicians is not keeping pace with industry expansion. He listed several
factors contributing to the problem including the cost of obtaining an FAA Airframe and

2-4
Powerplant Certificate (A&P) license (about $10,000 average), archaic training curricula and
equipment that is out of synch with modern industry technologies, and the lure of more lucrative
technical career fields such as computers and electronics.

To help fill the demand for MRO labor, repair stations and airline maintenance divisions are
increasingly relying on contract workers, both licensed and unlicensed [8]. The use of contract
workers allows flexibility to cover for seasonal or unplanned peaks in maintenance loads or for
specialist maintenance and specific projects. An additional advantage of contract workers is that,
while the hourly rates of pay for contract workers may be higher than those of permanent
workers, they are more cost-effective to employ because there are no hidden costs for such things
as overalls, meals, or transportation. Further, it has been suggested that temporary staff are more
prepared to work extended hours than are permanent staff [8].

2.3.2 Spare Parts Regulations.

Spare parts inventory management comprises a significant portion of maintenance costs, as well
as direct operating costs. For example, for moderate-sized fleets, the spare parts investment per
aircraft is typically 15% of the purchase price. Since capital costs associated with aircraft are
typically 30% of the direct operating cost, this makes spares capital about 5% of the fleet’s direct
operating cost. More importantly, the investment in spares inventory ties up cash flow since
these investments are often required before any revenue is generated. As a result, carriers are
less willing to stock and maintain large inventories of spare parts and are looking to independent
spares providers, OEMs, or one-stop repair stations to manage their supply chain.

In terms of safety in the spare parts industry, the primary concerns include the prevalence of
suspected unapproved parts (SUPs) and the problem of spares becoming more difficult to find as
the pool of mechanics dwindles. To help deal with these problems, in February 1998, the FAA
released AC 21-29B [9] outlining procedures for detecting and reporting suspected unapproved
parts. Further, it defines what the FAA will accept as approved by describing 11 FAA-
established criteria. By meeting any one of these criteria, parts that may not have received a
formal FAA approval can be accepted as airworthy. In other words, some parts do not need to be
explicitly approved by the FAA to be safe and legally eligible for installation.

Despite this broadened definition of approved parts, some airlines are unwilling to accept any
part that does not come from an FAA regulatory-approved source such as the OEM, part
manufacturer approval, repair station, or without the appropriate Form 8130-3 that certifies that
the part has been repaired or overhauled and is airworthy. Form 8130-3, originally used for
export airworthiness, was authorized by the FAA in the early 1990s for domestic return-to-
service use. Air carriers’ demands for Form 8130-3 are on the rise.

Further, in 1996, the FAA issued AC 00-56 [10] aimed at the voluntary accreditation of civil
aircraft parts distributors, which in turn would “assist in alleviating lack of documentation and
improve traceability.” The AC established that a distributor could be FAA-accredited if its
quality-control system was accredited by one of the following three organizations: the Society of
Automotive Engineers, using AS 7103 and AS 7104, American National Standards Institute,
using ISO 9000 series, and the Airline Suppliers Association, using its own ASA 100. The

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essential parts of these quality-control programs are the establishment of documentation for
parts, ensuring the end user that the part is legal and airworthy.

2.3.3 Revisions to Repair Station Regulations.

Under federal law, the safety of U.S. air passengers is a joint responsibility of the airlines and the
FAA. The airlines are responsible for operating their aircraft safely and must ensure that any
maintenance work contracted out is performed according to the carrier’s policies, procedures,
and requirements. The FAA is responsible for certifying airlines’ or repair stations’ operations
and then performing periodic inspections to ensure continued compliance with safety regulations.

Repair station operations are regulated by 14 CFR Part 145. A Notice of Proposed Rule Making
(NPRM) was released June 21, 1999, to revise 14 CFR Part 145, and the industry was allowed 4
months to submit comments. Based on these comments, the NPRM was revised once again and
released for public comment, the period for which ended January 29, 2002.

The following highlights the new requirements for repair stations [11]:

• Sets up some new definitions for accountable manager, article, directly in charge, and
line maintenance.

• Requires a new repair station manual to be developed that explains how the repair station
operates and its procedures to ensure the article worked on is properly approved for
return to service.

• Requires a new quality control manual that is similar to the currently required inspection
procedures manual.

• Allows for satellite repair stations as long as the satellite repair station is in the same
country as the repair station that has managerial control over the satellite repair station.

• Allows limited-rating repair stations the option to develop a capability list that identifies
articles by make and model that the repair station can approve for return to service.
These articles must be listed on the repair station’s operation specifications.

• Sets contract maintenance requirements (outside work), including work performed by a

noncertificated person.

• Eliminates the limited rating for manufacturers.

• Rewrote the housing requirement for an airframe rating to require permanent housing that
encloses the largest type and model of aircraft listed on its operations specifications.

• New FAA foreign repair stations may be issued a certificate based on certification of the
civil air authority of the country where the repair station is located, if there is a bilateral
agreement in effect.

• Training programs must be approved by the FAA and in place in 2 years.

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Objections have been raised regarding the lack of distinction between repair stations that service
the airlines and those that serve the nonairline, general aviation community. The National Air
Transportation Association, whose membership includes a number of smaller fixed base
operators (FBOs), argues that small repair stations do not have the financial or managerial
resources to fulfill the proposed requirements.

2.3.4 Regulations Affecting Code Sharing With Foreign Airlines.

FAA involvement in commercial aviation code-sharing agreements has typically been minimal.
However, the Korean Air (KAL) (a code-share partner of Delta Air Lines) freighter crash at
Shanghai in mid-April 1999 prompted the U.S. Department of Defense (DoD) and DOT to
summon major U.S. carriers to perform operational reviews of their international code-share
partners. Following the KAL crash, Delta Air Lines was asked to show how it knew KAL was in
compliance with International Civil Aviation Organization (ICAO), FAA, Joint Aviation
Authorities (JAA), or South Korean aviation authority requirements. In addition, a DOT
inspector general’s report concluded that code-share agreements are judged primarily by
economic criteria ahead of safety, and that the FAA provides minimal oversight of the
arrangements.

U.S. carriers were instructed to develop and implement a review program and conduct
operational audits and reviews on their partners within 12 months. Rather than face new
regulations, the carriers began conducting operational reviews on their own in July. Some
airlines sent out audit teams comprised of their own employees using checklists developed
within the airline, some used their own auditors and DoD-developed checklists, and others used
third-party consultants they believed gave them an outsider’s view of the partnership and
presented the government with fewer conflict-of-interest questions.

The audit encompasses all aspects of an airline’s operation. In terms of maintenance, a team will
examine the international carrier’s quality assurance practices, record-keeping systems, which
repair and modification data sources the carrier uses, facilities, equipment, staffing, and training
along with additional areas that are similar to a National Aviation Safety Inspection Program
assessment in the U.S.

Since some code-share partners may be certified under regulations other than the FAA’s 14 CFR
Part 129, reviews may also be conducted based on ICAO, JAA, or local civil aviation
regulations. One question that remains to be answered is how far down the chain a code-share
review must travel, and thus, whether U.S. carriers should have to review any third-party
maintenance shops its partners use.

2.4 OTHER RELATED RESEARCH EFFORTS.

The section provides a summary of the information regarding outsourcing of aircraft

maintenance on the FAA Human Factors website (http://hfskyway.faa.gov). There are three
major reports on the web site that have specific and detailed references related to outsourcing of
maintenance. One report, Goldsby [12], deals with the comparative training and qualification of
personnel in airlines and repair stations. The other two reports deal with the information and

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documentation flow, Drury [13], and oversight procedures, Goldsby [14], between in-house and
outsourced maintenance.

2.4.1 Why Outsource.

Some major reasons for outsourcing are

• Outsource maintenance requirements in excess of baseline capacity.

• Outsource maintenance for specific aircraft type—e.g., outsource maintenance for aircraft
will constitute a small part of the airlines fleet.

• Outsource maintenance for a specific maintenance function—e.g., outsource engine

overhaul.

Some factors used to determine which repair station should undertake the repair work are
reported as

• Repair station abilities, quality—labor turnover, use of contract labor, multiple document
formats, etc.

• Location of potential facilities.

2.4.2 Outsourcing Process.

Drury [12] produced a report that investigated the process of outsourcing, and in particular, how
information flows change. Figures 2-1 and 2-2 indicate how the flow of information changes
from in-house to outsourcing maintenance operations:

Airline FAA at
Airline
Aircraft

Finance
QA PMI
QC CMO
AMT

FIGURE 2-1. MAINTENANCE PERFORMED IN-HOUSE PROCESS DIAGRAM [13]

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 Other FAA at Repair Airline FAA
Airlines Repair Station at
using Station Airline

Aircraft
Repair
Station Finance Finance
PMI QA QA PMI
A FSDO QC QC CMO
B AMT AMT
C

FIGURE 2-2. MAINTENANCE OUTSOURCED PROCESS DIAGRAM [13]

The above diagrams highlight the increase in complexity as airlines outsource their maintenance
to repair stations. The communications channels become much more complex, and hence, there
is greater chance for error. Drury claims that introducing any interface between those who
operate the aircraft and those who perform the maintenance must introduce an error potential,
which is absent in in-house operations.

Drury found that information and documentation was a significant problem at repair stations.
Repair stations had to deal with many customers, and this forced aviation maintenance
technicians (AMTs) to switch between different styles of workcards and nonroutine repair
reports. Repair stations are required to have their own General Maintenance Manual (GMM) but
are also required to comply with each customer’s unique set of documentation (each customer
will have its own GMM that governs all procedures to be followed). Drury found that in dealing
with different airlines, AMTs had to change to work with differently designed documents, e.g.,
workcards had different layouts, levels of detail, wording, overall quality, flow of steps,
progression, etc. Repair stations also often rely on the airline for technical data because only the
airlines have a direct link to OEMs. Both these factors can lead to errors because an AMT
constantly has to change the way they operate (e.g., like a driver using different rental cars
frequently). Goldsby found that some airlines now have sections in their GMM that specifically
states who, what, when, and how work is to be conducted by contract maintenance providers.

Drury found that all repair stations attempted to keep AMTs and inspectors dedicated to one
airline at repair stations to keep them consistent in using documentation of that airline. This not
only helped minimize the potential for errors, but it also avoided extra training. The practice,
however, was not always commercially possible—given the changing schedule of aircraft
operations.

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Drury raised the idea that if outsourcing continues to increase, the repair stations themselves may
have a large role to play in standardizing documentation between airlines, as errors involving
change between documents can be seen by customers as a source of human error reduction
potential.

Drury found that on-site representatives held by airlines at most repair stations played a valuable
role in assisting information flow. But Drury stresses that the representatives in many cases were
only an avenue for airlines to express their dissatisfaction with the cost or delivery schedule of
the repair station—as opposed to being in place to facilitate quality operations or keep an eye on
quality of work performed by the repair station.

Repair stations also face other difficulties due to the variety of aircraft types they serve. The
variety makes it difficult to stock aircraft parts and special tooling at repair stations. In
particular, the type specific maintenance scaffolding systems popular with airlines are more
rarely seen at repair stations.

Drury’s report found that the comprehension of workcards was significantly correlated to good
document design methods. Following human design factors, good practice in document design
was shown to have a large impact on errors of comprehension. If an error on a workcard was
discovered at the repair station, definite guidance is needed by the airline. Even if the fix is
obvious to the experienced AMT, it would be dangerous to attempt to work around the error.
But AMTs usually wish to help the client airline, and hence, may be tempted to do the obvious,
rather than follow the wording exactly.

Drury also found that changes in workcards at airlines were claimed by AMTs to occur at glacial
speed of change. Conversely, when AMTs at a repair station request changes to airline
workcards, the changes tended to flow relatively quickly—possibly implying that the airlines are
concerned with third parties operating under workcards with potential errors—whereas practices
in house could be greater controlled.

Interestingly, Drury’s research found that error detection was generally done at different stages
(between work done at an airline in-house compared with work done at a repair station). Most
errors tended to be either a lack of knowledge or deliberate flouting of procedures by the
individual. Thus, root causes were generally seen as inadequate motivation or poor training.

2.4.3 Training and Qualifications [12] and [14].

In undertaking maintenance operations, both airlines and repair stations must comply with
relevant FARs. Air carriers operate under 14 CFR Part 121 regulations. Maintenance providers
and repair stations operate under 14 CFR Part 145.

Under 14 CFR Part 121, airlines have specific requirements for certification, training, and
qualification of maintenance personnel. Operating under 14 CFR Part 145, repair stations do not
have the same level of specific and detailed requirements for certification, training, maintenance
programs, documentation, workcards, and organizational structure as air carriers that operate
under 14 CFR Part 121.

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Goldsby [12] concluded that the best the maintenance community had to offer was only available
at the OEMs and the larger, successful air carriers. The maintenance operations of repair stations
operating under 14 CFR Part 145 were generally inferior to that of the carriers operating under
14 CFR Part 121.

The repair stations have considerably less computerization and automation. In many cases,
records of training and qualification are manually kept. It was found that, in some third-party
repair stations, personnel safety procedures and hanger equipment used were well below the
standards of air carrier maintenance. The repair stations are not nearly as far along as the airlines
in developing maintenance human factors and maintenance resource management programs.

Goldsby [14] also commented that FAA personnel at airline facilities are Certificate
Management Office personnel, who are usually responsible for a single carrier. Certified repair
stations, however, operate under the Flight Standards District Offices (FSDO)—office inspector
system. FSDOs were often staffed by personnel most experienced with general aviation, with
only a few of the offices having experience in large air transport operations.

In general, it is claimed that the day-to-day operational maintenance requires technicians who are
generalistsA&P mechanics with the knowledge and skills necessary to ensure aircraft
operational safety. Maintenance that is completed when aircraft are out of service—heavy
maintenance checks, detailed inspections, major repairs and alterationsare mostly completed
by specialists. Although the majority of the specialists are A&P certificated, many are
uncertified and perform under the supervision of certificated individuals.

Repair station maintenance staff differs significantly from those in air carriers in that the
majority of those working in repair stations are specialists of whom only half are A&P certified.
Another element of repair station staffing is due to the fluctuating workloads; there is a large
pool of maintenance personnel who work for temporary placement organizations. These
organizations supply technicians to repair stations, allowing them to meet peak workloads.
These contractors move from one organization to another as needed and have become a
significant work force in the third-party maintenance environment.

Maintenance workload is more predictable at the air carrier environment than at a third-party
repair station. An airline has control over all aspects of its fleet—such as maintenance plans and
aircraft routing. A third-party repair station has limited or no control over these elements. Thus,
the workload varies due to airline scheduling demands. Staffing is, therefore, variable at repair
stations, as is facility use and management.

There is a significant amount of temporary workers at repair stations that are provided by fourth-
tier aviation maintenance support contractors. This brings another complexity into the already
complex puzzle. Temporary workers, shifting from repair station to repair station, will have to
learn a new set of procedural tasks every time they change contract. This could potentially lead
to errors.

With respect to training, Goldsby [12] observes that in the competitive environment of today’s
air transport industry, operators and maintainers were inclined (in general) to only perform

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training that was government mandatory. Under the current regulations, AMTs have no annual
recurrent training requirements beyond what is specified for a few with special task
requirements. There is no system in which the FAA can communicate with A&P certified
mechanics to pass on regulatory information, recent safety issues, accident reviews, breakdowns
in the system, or human factors issues that could adversely affect aviation safety if not remedied.

Drury mentions a few comments on the rate of labor turnover and the impact on training:

• Repair stations are affected more by AMT shortage than airline carriers.

• As 14 CFR Part 121 carriers have downsized internal maintenance operations, much of
the experience has been lost to the industry altogether, as experienced members have
gone outside aviation or retired early.

• The industry seems to exhibit a migratory workforce, as workers move easily for small
changes in conditions. Repair stations report a turnover of around 30%-50% for AMTs
and up to 100% for managerial staff.

• Most AMTs at repair stations are contractors, therefore, there is an economic pressure to
minimize training for temporary personnel. Some repair stations, in an attempt to
maintain continuity, attempt to limit the number of contract personnel in the repair station
to about 20%.

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3. RESEARCH METHODOLOGY.

This section outlines the methodology used to conduct this study. To ensure consistent
collection of data, a formal interview process was developed. This process consisted of
developing a standard list of questions and an interview protocol. After collecting the interview
data, it was entered into a database and subsequently analyzed. The results of the analysis were
synthesized into performance measures for repair stations.

3.1 INTERVIEW DEVELOPMENT.

The information being sought in this study is gathered primarily from the perspective of aircraft
maintenance personnel. The target interview respondent was an airline representative working in
the maintenance area, primarily in a quality control/assurance capacity.

The interview questions were developed to map the process of how an airline outsources any
maintenance function. The interview document is comprised of four sections:

• Background Information

This section sought to gain background information about the airline for which the
respondent works. The questions focused on the size of the airline and the practices of
the maintenance department, e.g., how much maintenance is outsourced, typical
maintenance functions outsourced, and which types of vendors the airline contracts.

• Criteria for Third-Party Vendors

This section focused on how airlines identify potential vendors, e.g., the requirements of
both the airline and the vendor for each other, and how contracts are awarded.

• Monitoring and Assessing Vendor Performance

This section focused on what an airline monitors in terms of vendor performance and
how that is done. In addition, this section sought information about the process of
contract renewal or termination.

• Oversight by Other Entities

The questions in this section sought information regarding the airlines’ relationship with
CASE, industry groups, and the FAA.

For the repair stations that were interviewed, six broad areas were investigated:

• Background Information

This section sought information about the repair station for which the respondent is
employed.

3-1
• Labor and Management Issues

This section focused on the organization of the repair station and staffing and personnel
issues related to the maintenance workforce.

• Certification/Regulatory Issues

The questions in this section focused on how the repair station ensures compliance with
both FAA and client requirements and sought reaction to the proposed changes to 14
CFR Part 145.

• Relationships with Clients

This section sought information regarding how contracts are managed with the clients
and what information flows between the two entities.

• Use of Subcontractors

This section sought information about the process and practices of repair stations using
subcontractors to complete work.

• Quality Control Issues

The questions in this section focused on how quality control is maintained for clients in
the repair station environment.

A complete listing of questions in each section is provided in appendix A. The interview was
designed to take about an hour to minimize disruption to the schedule of the respondents.

3.2 PROTOCOL.

A protocol in dealing with the survey respondents was developed. The protocol ensures that the
information was collected consistently from each respondent.

As most airlines vary in terms of organization, the actual job title of the respondent was expected
to vary as well. However, the interview was designed to be answered by a representative from
the maintenance division. Ideally, the respondent would be the overall manager of outsourced
maintenance. If there was a team of people across several departments that were involved in the
outsourcing process, the representative from the quality control division of the maintenance
department was contacted.

The airlines and repair stations that participated in this study were identified primarily by
contacts from previous research. Additional contacts were identified by the Repair Station
Expert Panel, and in most cases, a contact at the newly identified airline was furnished by the
panel member. All potential respondents were contacted initially by telephone and were
provided with a brief summary of the study objectives and requirements. During this initial

3-2
discussion, the involvement of the respondent was requested, arrangements were made to meet,
and a follow-up letter was sent to confirm the arrangements.

All interviews were conducted in person to ensure consistent application and interpretation of the
questions. Each question that was applicable to the airline of each respondent was asked. After
each interview was completed, a follow-up letter was sent, thanking the respondent for their
participation.

To ensure a nonthreatening environment for the respondent, specific responses to the interview
questions were considered confidential. Neither the airline nor the individual participating in the
interview are referenced specifically in this report.

3.3 ANALYSIS.

To store the information collected from each respondent, a database was developed using Excel.
This method allowed easy comparison of responses to each question from each airline in the
sample. In addition, graphical depictions of the responses could be easily generated and
appropriate statistical analysis of the data could be performed. While some quantitative data was
collected from each respondent, the bulk of the information sought was qualitative.

3.4 PERFORMANCE MEASURES.

The results from the analysis were synthesized to generate performance measures in order to rate
certain characteristics of repair stations. The focus was to determine when a repair station may
be operating in a manner that might result in an unfavorable condition. This was accomplished
by grouping similar or insightful responses that indicate certain portions of the repair station
should be monitored.

3.5 VALIDATION.

To validate the results, a select group of those interviewed from both the airlines and repair
stations were presented with the performance measures. Each respondent provided a relative
criticality rating for each and relating it to its importance to repair station operation. Considering
these responses, a composite criticality rating was assigned.

3-3/3-4
4. ANALYSIS OF AIRLINE INTERVIEW RESULTS.

4.1 INTRODUCTION.

The primary objective of this study was to determine what criteria airlines use to select a vendor
to perform outsourced maintenance functions. Based upon this information, performance
measures to monitor the quality of vendor work are to be developed. The analysis of the
interview data is presented in such a manner to facilitate the process of developing these
performance measures.

4.2 DESCRIPTION OF AIRLINES INTERVIEWED.

A total of ten interviews were completed. This sample includes two major airlines, three
regional airlines, and five niche airlines. In addition, select questions were asked during a visit
by another researcher of a major, European-based airline.

The job titles of the respondents that were interviewed varied. At the major airlines, the job titles
of the respondents were manager of contracted maintenance and manager of the quality control
division. At the regional airlines, one respondent was the director of quality control, while
another was the manager of warranties in maintenance. At the niche airlines, the title of the
respondents included the director of maintenance, the vice president of technical operations, and
the director of quality control.

4.3 BACKGROUND INFORMATION.

All the airlines that participated in this study outsourced at least part of their maintenance
function; in one case, the airline was in the process of outsourcing a complete overhaul of an
airplane. While most respondents indicated that costs were a major reason for outsourcing their
maintenance function, they also cited several additional, interrelated cost drivers that were taken
into account. Figure 4-1 depicts some considerations that the sample of respondents made when
deciding to outsource maintenance tasks.

Reliability and adherence to work schedule are two such factors. One respondent stated that the
potential revenue loss for an aircraft that exhibits poor reliability is always greater than any cost
savings achieved from outsourcing the maintenance in the first place.

The other cost-driving factors are labor considerations and the need for specialized equipment.
The labor consideration deals with training and expertise of the workforce to complete certain
tasks. Many respondents commented that a repair station often had the expertise in their facility
to complete specialized tasks. Furthermore, repair stations also possessed specialized tooling
required to complete MRO tasks. These tools may be cost prohibitive for an upstart or small
airline. The capabilities of the repair station also came into play with these considerations. A
repair station may be able to complete the work more quickly because of its expertise in a certain
area. This translates to a cost savings to the airline in terms of decreased downtime of an
aircraft.

4-1
 Cost

Need for Special Equipment and

Tooling

Special Labor Skills

Other

0 1 2 3 4 5 6 7 8 9 10 11

Yes No No Response

FIGURE 4-1. FACTORS CONSIDERED WHEN MAKING OUTSOURCING DECISIONS

The scale of outsourcing within the sample of airlines interviewed also varies. Figure 4-2 shows
how many of the airlines outsourced some common maintenance functions. Line maintenance
functions were typically outsourced at the stations away from their bases or overseas. The niche
airlines were the only respondents in the sample to outsource their light-scheduled checks
(A and B). Niche airlines also outsourced their heavy-scheduled checks (C and D). However,
other airlines also reported that they outsourced their heavy checks as well.

Line Maintenance

Light Scheduled Checks (A, B)

Heavy Scheduled Checks (C,D)

Componen/Systems Overhaul

Engine

Other

0 1 2 3 4 5 6 7 8 9

FIGURE 4-2. TYPICAL MAINTENANCE FUNCTIONS OUTSOURCED

4-2
Almost all the respondents stated that they outsourced at least some of their component overhaul
to repair stations. The primary reason for this was the lack of expertise and tooling in-house.
Engine maintenance was most likely to be outsourced for the same reasons. Likewise, all
respondents stated that other maintenance was performed by a third party. This included such
items as propeller overhaul, painting of aircraft, composites, and specialized avionics work.

Figure 4-3 depicts the types of outsourcing providers that the respondents currently used. All
except one of the respondents stated that they employed repair stations. One respondent was
careful to note that the term repair station referred to facilities that hold a 14 CFR Part 145 repair
station certificate. All except two respondents had contracts with component shops. Only two
respondents used FBOs and only in the case of on-call maintenance at out stations. Five of the
seven respondents mentioned that they contracted with other airlines to perform some of their
maintenance-related tasks.

Repair Stations

Component Shops

FBOs

Other Airlines

Other Entities

0 1 2 3 4 5 6 7 8 9 10
Responses

FIGURE 4-3. TYPES OF OUTSOURCING PROVIDERS

Of the ten respondents, only one airline had a company-imposed limit regarding the percentage
of their maintenance responsibilities that could be outsourced (figure 4-4). In this case, the limit
is set at 20% of the total maintenance function, which is a constraint that was imposed by the
union contract. This particular respondent also noted that their airline only outsourced 10% of
the maintenance functions at the current time. Other respondents that were unionized mentioned
that the union is sensitive to issues related to outsourcing, but that there was no formal limit
stipulated in their contract.

4-3
 1

Yes No

FIGURE 4-4. LIMITATIONS ON OUTSOURCING

4.4 CRITERIA FOR THIRD-PARTY VENDORS.

In identifying potential maintenance providers, the respondents relied heavily on reputation and
recommendations from other users of maintenance services (figure 4-5). One respondent had a
fleet of one type of aircraft. In organizing their maintenance department during the start-up
period, they simply identified the vendors that had known capabilities for their particular fleet of
aircraft. Other respondents relied on information obtained at trade shows or operators’
conferences.

Research

CASE Audit

Advertisements

RFP

Interviews/Site Visits

Other

0 1 2 3 4 5 6
Responses

FIGURE 4-5. METHODS USED TO IDENTIFY POTENTIAL MAINTENANCE

PROVIDERS

4-4
Most respondents that were outsourcing larger projects issued request for proposals (RFP) and
conducted on-site interviews with the vendors being considered. The respondents that did not
issue RFPs or conduct interviews typically were outsourcing smaller projects, primarily
component overhaul.

Five of the respondents were members of CASE. Only two of the respondents stated that they
used CASE audits as a source of identifying information when identifying potential providers.

Three of the ten respondents commented that they consulted the principal maintenance inspector
(PMI) of the repair station of a potential provider (figure 4-6). One respondent then qualified
this response by stating that this is done indirectly as part of their audit of the repair station.
Another respondent said that they would only consult the PMI if they discovered an enforcement
action that was considered significant.

Yes No

FIGURE 4-6. RESPONDENTS THAT CONSULT THE PMI OF A POTENTIAL PROVIDER

In the process of identifying potential maintenance providers, the respondents stated that foreign
repair stations were considered differently than domestic repair stations. The primary reason for
considering foreign repair stations differently than domestic is geography and the related time
and costs in dealing with a vendor that is located far away. One respondent mentioned that
foreign repair stations would have to complete work more quickly to be competitive with
domestic repair stations due to the increased travel time to reach the repair station. When asked
if foreign repair stations required any special oversight by the firm, all respondents answered no.

Figure 4-7 depicts some of the criteria that the respondents considered regarding the provider’s
workforce. Most respondents did not consider the makeup of the labor force of the potential
provider. Only one respondent critically looked at these issues. This respondent commented that
all leads and inspectors must have an A&P, and they also evaluated the number of contract
versus permanent employees. The contract employees were considered an issue since it was felt
that as the number of contract employees increases, so does the likelihood of inconsistent

4-5
training and potential problems. Average experience of employees was also a factor that was
considered. Wages were considered by two of the respondents, with one response qualified with
the statement that most repair station wages are in a similar range.

Unionization

Alliance with a School

Certificated Percentage

Employee Turnover

Wages

Other

0 1 2 3 4
Responses

FIGURE 4-7. WORKFORCE CONSIDERATIONS FOR REPAIR STATIONS

Financial status of the provider was a consideration for most of the respondents. However, only
one of the respondents stated that a credit check was actually performed, while two respondents
stated that they consulted publicly available financial information about the potential provider.

When queried about any specific requirements that the respondents may have for their potential
maintenance providers, most respondents provided examples that are standard. For example, the
appropriate documentation, including maintenance manuals, must be provided. Only one
respondent replied that they required any special insurance beyond what they considered the
industry norm. This respondent also stated that the vendor would also require special insurance
coverage.

In making the final decision to accept a proposal from a potential contractor, the respondents
stated that performance and cost were the two most important criteria in comparing bids from
potential providers. All respondents stated that it was an equal balance between these two
criteria. Guarantees were not stated as important in the initial decision to award a contract to a
vendor. However, on-time performance is explicitly written into the contract to ensure

4-6
satisfactory performance on the part of the vendor. Contract periods also vary according to the
specific bill of work, which varies by the number of aircraft and the complexity of the task.
Specific answers varied from 18 months to 3 years, with three respondents stating 3 years. Most
respondents stated that contracts are often modified to reflect changes in scale and scope that is
usually mutually agreed upon by both parties.

4.5 MONITORING AND ASSESSING VENDOR PERFORMANCE.

Most respondents said that company personnel are on-site at a vendor for some period of time
(figure 4-8). When company personnel are on-site with a vendor, they function as a liaison
between the airline and the vendor and as a resource to the vendor. With larger contracts, the
respondents stated that company personnel are on-site full-time. The number varies from one to
seven people, depending on the scope and scale of the particular contract. All but one
respondent said that on-site personnel were company personnel. In the case where the on-site
personnel were contracted, the contractor has actually been a previous employee of the vendor.

Yes No

FIGURE 4-8. COMPANY PERSONNEL ON-SITE AT A VENDOR

The on-site personnel function as advisors to the jobs and keep track of progress and problems.
They are usually maintenance personnel with a variety of experience. They also audit the work
that is being performed by the vendor.

The respondents reported a variety of data that is collected by the airline about work being
performed by a vendor. The sources of this information include billings and invoices, required
FAA documentation, discrepancy reports, and installations and removals reports.

All respondents stated that quality assurance measures that apply for all work done by the airline
also apply to the work performed by any vendor. Most respondents said they did not perform
any special audits on the work performed by vendors. Three respondents said if they did audit

4-7
any work, it was done because someone discovered something out of the ordinary and suspected
further problems.

Five of the ten respondents said they had procedures that were completed after the aircraft had
been returned from a vendor. This most frequently involved what one respondent defined as a
conformity/acceptance check. This type of check involved reviewing the documentation to
ensure that all paperwork was in order and that all procedures had been properly followed. One
respondent stated that they performed a special 7-day monitoring of the aircraft after it had been
returned from the vendor. Another respondent stated that any work that had been outsourced
was reflected in their internal paperwork and was tracked to see if there were any differences
between what services had been purchased and what work had actually been completed.

Five of the ten respondents mentioned that a change in management at a vendor can potentially
cause problems. One respondent stated that maintaining partnerships is important for completion
of the work and constant turnover stands in the way of this. Likewise, all respondents stated that
the bankruptcy of a vendor is a great concern. The bankruptcy proceedings of a vendor
sometimes come as a surprise and can pose significant risk and operating challenges to the
airline. In addition to the difficulty of repossessing company property at the vendor, often the
FAA revokes the certificate of the repair station and requires the work that has already been
completed by the repair station to be reinspected.

On the other hand, extensive growth of a vendor was of concern to six of the respondents. One
respondent suggested that problems from extensive growth are likely reflected in the quality of
the work. Another respondent suggested that this may be due primarily to new personnel who
may not be experienced as existing personnel. There might also be paperwork problems.
Another respondent commented that this may cause a dilution in the management staff of the
vendor.

When it is time to renew a contract with a vendor, all the same criteria used in the initial decision
to award the original contract apply. However, one respondent pointed out that in the renewal
process there is an experience base from which to work, and that the airline is in a greater
position to deal with concerns. Cost becomes less of an issue when renewing a contract because
there is already an established relationship between the vendor and the airline.

Two respondents stated that they had never terminated a contract. The respondents offered
several reasons for terminating contracts. These include flagrant quality problems, longer cycle
times than originally stipulated in the contract, or the vendor exceeded their capabilities.

4.6 OVERSIGHT BY OTHER ENTITIES.

Most respondents felt that the industry alphabet groups, such as the Air Transport Association
and the Regional Airline Association, did not necessarily provide a forum for discussing issues
related to outsourcing maintenance. Two respondents said that they have gleaned general
maintenance information at operators’ conferences that were in some cases sponsored by the
alphabet groups.

4-8
Five respondents stated they belong to CASE, while one respondent was previously an associate
member. Most CASE respondents used CASE audits, but only supplementally to their own.
One respondent said they report any violations by a repair station or any contract terminations to
CASE. While all respondents accepted CASE audits as a standard, they also mentioned they
usually went over and above those standards for their own internal purposes.

All respondents reported that there was very little coordination between the PMI of the vendor
and the airline. The only communication that generally occurs is in the case of a problem. None
of the respondents said that they were involved when the FAA conducts inspection of a vendor.
Most respondents are not notified when FAA revokes a 14 CFR Part 145 certificate of a vendor.

4-9/4-10
5. ANALYSIS OF REPAIR STATION INTERVIEWS.

5.1 INTRODUCTION.

To provide a balanced view of the entire system of the outsourcing process, representatives of a
small set of repair stations were interviewed. The questions asked served to provide an
additional perspective on the issues identified by airline representatives as important. In
addition, pressing issues that are facing repair stations were also identified. The analysis of the
results of the repair station interviews also provided input for the development of the
performance measures.

5.2 DESCRIPTION AND STRUCTURE OF REPAIR STATIONS INTERVIEWED.

A total of six repair stations were involved in the study. The director of quality assurance was
most often the primary contact at the facility and was subsequently interviewed. In one instance,
the vice president of the repair station served in this capacity.

All of these repair stations were considered larger facilities, i.e., having significant revenue
generation, hangar capacity for multiple aircraft, and the ability to handle multiple components.
Three of the facilities were OEMs—two of the facilities working on components and one was a
nose-to-tail provider. Two repair stations were independents, both offering nose-to-tail services.
The remaining repair station was previously the maintenance department for a regional airline
that had been spun off as an independent repair station.

The date of certification of the repair stations was varied. In one instance, it was in the 1950s
and the latest instance was in 1996.

All of the repair stations ran two shifts, with most running three or more. A typical workweek
for an employee at a repair station was at least 40 hours a week and often included some
overtime. Half of the repair stations involved in this study were unionized.

5.3 LABOR AND MANAGEMENT ISSUES.

One of the areas of interest to some of the airline respondents in this study was the makeup of the
labor force of the repair stations that they were evaluating. To a large extent, the labor force
determines the capability of a repair station.

Sources of labor for new hires ranged from other repair stations, to graduates of A&P schools to
retired military personnel. One respondent reported that they kept cognizant of where layoffs
were occurring at other repair stations and were certain to step up recruiting efforts in the area.
While all respondents said previous work experience was preferred for new hires, in many cases,
it was not a requirement. Often, the human resources department handled background checks at
the facilities interviewed. While most respondents specifically stated that being able to
communicate with the English language was essential, in only one case was it explicitly a
requirement for any position.

5-1
The range of certificated labor was from 20% to 90%. This includes any type of certification,
including A&P or repairman certificate. OEMs that focused on components had a lower percent
of certificated labor. With one exception, the repair stations that performed nose-to-tail services
had a higher percentage of certificated labor, which included mostly A&Ps. As shown in
figure 5-1, the range of the ratio of workforce assigned to each inspector varies considerably
across the repair stations interviewed.

RS6

RS5
REPAIR STATIONS

RS4

RS3

RS2

0 5 10 15 20 25 30
Workforce per Inspector

FIGURE 5-1. WORKFORCE PER INSPECTOR AT REPAIR STATIONS

Temporary or contracted labor was not used at three of the facilities. At the facilities that
employed temporary labor, the percentage of the workforce that was temporary did not exceed
20%. All of the respondents stated that this was the maximum value they preferred to have at
their facilities. However, some respondents did claim that this value was exceeded on certain
occasions, primarily during surges in the workload.

The average hourly rates for maintenance personnel are shown in figure 5-2. The range is fairly
close and low variability may be due to the geographic locations of the repair stations. One
respondent noted that the hourly wages for maintenance personnel are fairly similar.

All of the facilities with a unionized workforce had to hire within the company and promoted
based on seniority policy. Most of the nonunionized facilities did mention that promotions were
based upon merit, more than seniority. Regardless of union status, most of the respondents
reported that management positions required bidding.

5-2
 RS6

RS5
REPAIR STATIONS

RS4

RS3

RS2

RS1

0 5 10 15 20 25
AVERAGE WAGE PER HOUR

FIGURE 5-2. REPORTED AVERAGE WAGE PER HOUR

Training programs and their structure varied significantly throughout the repair stations that were
interviewed. One facility’s training program was strictly on-the-job training. Another
respondent contracted a majority of its training to flight safety. Still another respondent reported
that their goal is to provide, on average, 80 hours of training per year to each AMT. At this
repair station, the content of the training was dependent upon the position and experience of the
employee.

All respondents at repair stations reported a shortage of personnel. Two facilities reported their
turnover rate for maintenance personnel exceeded 100% per year. On the other hand, three
facilities reported their turnover rate was low, and in one case, it was reported to be 1%-2%.
Similarly, the number of open positions at two repair stations interviewed approached 25% of the
current maintenance workforce. At two other repair stations, there were no open positions.
However, at these two facilities, this was a decision that was made by management, and there
were plans to begin hiring.

Turnover of management was fairly common at the repair stations interviewed. Most
respondents reported that in the last 5 years, there had been at least one fairly sizable turnover in
upper management. One respondent stated that while there had been a change in upper
management, the production control staff had remained intact, which provided some degree of
stability to the facility.

5.4 CERTIFICATION AND REGULATORY ISSUES.

Most respondents stated that the differences that occurred was due to the different authorities and
regulations (i.e., FAA regulations versus JAA regulations) under which the work was performed.

5-3
However, those issues are transparent to those working on the shop floor level. Similar
sentiments were expressed when asked about completing the same work for different customers.
Most respondents reported that differences were handled or rectified at a management level,
specifically by either the quality control, planning, or engineering departments.

The most common complaint of the respondents concerning oversight by a cognizant agency
(e.g., FAA or JAA) was that the interpretation of the rules and regulations often varied from
inspector to inspector. The root of this difficulty is that the regulations contain too many gray
areas that are open to interpretation and are not specific or direct enough. This situation
frequently led to conflict between the inspector and the repair station. Others felt that they had
little trouble with the relationship with their inspector.

5.5 RELATIONSHIPS WITH CLIENTS.

As with the airline interviews, the respondents at the repair stations reported that their typical
contract period varied widely and was dependent upon the work that was performed. One
respondent stated that their standard boilerplate contract was 1 year. Only one respondent
reported that their repair station terminated a contract from their end. However, in this case, it
was considered a business decision.

There was variation in the responses as to whether the repair station required a representative
from an airline to be on-site at the repair station. Two of the overhaul component facilities stated
that this was not required due to the scope of the work that they perform, while the remaining
component overhaul claimed that often an on-site representative was required for the same
reason. The nose-to-tail facilities said that frequently an on-site representative was present.
However, in some cases, it was a requirement, while in others it was not.

5.6 USE OF SUBCONTRACTORS.

All respondents stated that they used other vendors as subcontractors. However, the reasons for
using subcontractors varied according to the function of the repair station. All respondents
reported that they used subcontractors for areas in which they possess little or no expertise. In
one case, this occurred at the request of the client, specifically to involve the manufacturer of
certain components on an aircraft. Two of the respondents stated they use subcontractors to even
out surges in their work. All respondents stated that the subcontractors they use are always
FAA-certificated facilities.

Two of the respondents stated specifically that they informed the customer if they use
subcontractors while performing work for that customer. However, the method of
communication was via the paperwork for that particular aircraft or component.

5-4
5.7 QUALITY CONTROL ISSUES.

Most respondents stated that they audit their vendors or suppliers at least once a year. In one
instance, one respondent reported that they audit their primary vendors once every other year.
This was dependent upon the scale and scope of work performed by the vendor. In most cases, if
the vendor was considered one which was primary and performed substantial work, an audit was
done on-site by a representative of the respondent. If the work was not considered substantial, a
questionnaire was mailed out to be completed by the vendor.

Internal audits were reported as being completed daily by the quality assurance department at
each repair station interviewed. A quality assurance department existed at all repair stations in
the sample.

FAA audits were performed regularly on each of the repair stations in the sample. The
frequency of these audits varied from once a month to once a year. The reasons for this
difference in frequency depended upon the size of the facility and the relationship with the
cognizant PMI. Variability was also reported as to the frequency of audits by clients, which
ranged from never to once every few years. In some cases, the inspector was from CASE on
behalf of the client. Three respondents stated that a new client usually inspected the facility.
Occupational Safety and Health Administration (OSHA) was reported as another government
agency that performed inspections, but none of the respondents claimed they did so frequently.
Two respondents reported that they were audited by the JAA once every 1 to 2 years.

There was some variability as to the responsibility of returning the aircraft or component to
service. Two repair stations reported that the airline for which they were performing work was
involved in this process. A similar situation existed at one repair station for supplying parts. In
this case, it was the responsibility of the client to determine part sourcing.

5-5/5-6
6. DEVELOPMENT OF RISK INDICATORS AND PERFORMANCE MEASURES.

6.1 INTRODUCTION.

Risk indicators provide a means to monitor the relative condition of an operation, while
performance measures provide the means to rate the effectiveness of an operation. In the context
of this study, risk indicators and performance measures should reflect the effectiveness of a
repair station’s operation. Ideally, the data required as input to the risk indicators and
performance measures are already part of the FAA inspection process or can be gathered from
readily available sources.

The analysis presented in the previous section provides the basis for developing the performance
measures. The different areas of the repair station operation are identified by the respondents
when seeking bids for work, and subsequently monitor, while a repair station is under contract.
These items are then translated into risk indicators or performance measures.

6.2 IDENTIFICATION OF RISK INDICATOR AND PERFORMANCE MEASURES FOR

REPAIR STATION OPERATION.

The interview results yielded three primary reasons an airline outsources to a repair station.
These include less turnaround time to complete a particular task, lower and fixed cost, and less
investment in labor and capital equipment (i.e., tooling and test equipment).

Based on the analysis, the areas of repair station operation that the respondents monitored can be
grouped into three categories: capabilities, performance, and administration. Each category is
discussed in greater detail below.

6.2.1 Capabilities of Repair Station Operation.

Obviously, it is important for a repair station to be able to deliver what was promised in its
contracts. In other words, the repair station must actually possess the capabilities to deliver the
services it says it is certified to perform. One respondent mentioned that while comparing bids
for a contract, the evaluation of the bids focused on whether or not the repair station is operating
within their FAA-approved capabilities. While most respondents stated that reputation guides
this judgment, there are several points that can be measured to ensure that repair stations are
operating within their capabilities.

In order for repair stations to operate within their capabilities, there are three components that
can vary: labor, capital equipment, and certification of the repair station itself. Labor can vary
in terms of number, years of experience, certifications, and qualifications. Labor may also be
contracted from temporary labor services. All of these variables affect the performance of the
work. Capital equipment can vary by the tooling and test equipment that the repair station
possesses. In some cases, 14 CFR Part 145 clearly details what a repair station must possess.
The regulation also explicitly states that personnel who operate this equipment must be properly
trained. In terms of certification, the repair station must possess the proper rating to perform the
work that they advertise as able to do. Ratings vary by aircraft types as well as particular
sections of the aircraft.

6-1
Based on this scheme, table 6-1 identifies performance measures that quantify the capabilities of
a repair station. The table includes the variable or unit that can be used as a data source, the
significance of the performance measure related to repair station capabilities, the 14 CFR Part
145 reference for the performance measure, and the desirable range of values for the
performance measure. Complete 14 CFR Part 145 references are listed in appendix B.

TABLE 6-1. PERFORMANCE MEASURES FOR REPAIR STATION CAPABILITIES

14 CFR
Performance Measure Unit Significance Reference Criticality
Total number of Number Indicates ability to complete 145.39b M
employees workload
Technical personnel Number Indicates ability to complete 145.39b M
workload
Contract employees Number Possible lack of experience, training 145.43 M

Certificated employees Number Denotes qualification to legally 145.43/ M

perform work 65.89
Noncertificated Number Denotes qualification to legally 145.39a M
personnel perform work
Repairmen Number Denotes qualification to legally 145.39d M
perform work
Training of employees List Indicates qualifications of employees 145.43 H
Experience of employees Average Denotes expertise in area, stability of 145.43 H
workforce
Tools and test equipment List Capability to legally perform work 145.49, H
145.39
Ratings (Class, limited) Number Certification to perform work 145.31, L
145.33
Length of certification Years Indicates experience of the operation 145.17 L
JAA listed Y/N Indicates ability of repair station to N/A M
perform services in accordance with
JAA

Most of these performance measures are based upon readily available data. Some of the data is
already collected as part of FAA inspections.

6.2.2 Performance of Repair Station Operation.

Performance of repair station operation refers to the quality of work the repair station produces.
While capabilities focus on what is possible for the repair station to do, performance focuses on
what the repair station actually does. At a higher level, these attributes of a repair station are
actually what the airlines monitor the most.

Based on this scheme, table 6-2 lists performance measures that relate to how well a repair
station delivers on its work. The table includes the variable or unit that can be used as a data
source, the significance of the performance measure related to repair station performance, the

6-2
14 CFR Part 145 reference for the performance measure, and the desirable range of values for
the performance measure. Complete 14 CFR Part 145 references are listed in appendix B.

TABLE 6-2. PERFORMANCE MEASURES FOR REPAIR STATION PERFORMANCE

14 CFR
Performance Measure Unit Significance Reference Criticality
Audit procedures in Y/N Ability to detect and rectify errors 145.59, H
place in work 145.63
Security measures List Possible security breach 145.35 L
Ability to meet turn Time diff. May indicate working outside of N/A H
times capabilities
Number of work Number May indicate poor performance 145.2 H
discrepancies
SUPs infractions Number Indicates poor suppliers of parts and 145.45 H
parts tracking
Certification infractions Number Indicates repair station operating 145.31, H
outside of its capabilities 145.33
Legal actions Number Indicates possible difficulties in N/A M
management
Number of contracts Number Indicates availability of repair 145.39b M
station resources

Data to support these performance measures may be more difficult to obtain in some cases.
Many of these items are measured strictly by the airline and are considered proprietary
information by both the airline and the repair station. In this case, it is unlikely that this data
would be made publicly available or even made available to the FAA.

6.2.3 Performance of Repair Station Administration.

Administration of a repair station refers to the overall organization and operation of the repair
station. Management issues are also included under this category.

Based on this scheme, table 6-3 lists performance measures that relate to repair station
administration. The table includes the variable or unit that can be used as a data source, the
significance of the performance measure related to repair station administration, the 14 CFR Part
145 reference for the performance measure, and the desirable range for the performance
measure. Complete 14 CFR Part 145 references are listed in appendix B.

The data to support these performance measures will mostly be obtained from data sources
outside current FAA inspections.

6-3
 TABLE 6-3. PERFORMANCE MEASURES FOR REPAIR STATION ADMINISTRATION

14 CFR
Performance Measure Unit Significance Reference Criticality
Discrepancies in billing Number Lack of attention to paperwork in N/A L
other areas
Financial Status Y/N Bankruptcy is a problem; may N/A H
indicate other larger problems
Employee turnover Avg. exp May indicate lack of experience in 145.33 L
Number of certain areas
new emp.
New employees Number Denotes growth of company; N/A M
indicate potential training gaps
Wages Dollar avg. Lower wage, lower quality N/A L

Change in management Y/N May indicate change in procedures 145.43 H

and focus of operations
Termination of contracts Number Possible inability to keep up with N/A M
work

6.3 IDENTIFICATION OF PERFORMANCE MEASURES FOR AIRLINES WITH MAJOR

CONTRACTS WITH REPAIR STATIONS.

As stated previously, the airline contracting a repair station for a major contract cannot simply
state the specifications for the work and expect it to be completed in a satisfactory manner. The
airline usually provides a fair amount of support to ensure proper completion of the job.

In analyzing the interview responses, it is apparent that there are certain actions that airlines take
when outsourcing major maintenance. These primarily deal with how the airline provides
oversight of the functions the repair station has been contracted to perform.

Table 6-4 lists the performance measures that are related to the airlines that may have an impact
with repair station performance. The table includes the variable or unit that can be used as a data
source, the significance of the performance, the 14 CFR Part 145 reference for the performance
measure, and the desirable range of the performance measure. Complete 14 CFR Part 145
references are listed in appendix B.

The data to support these performance measures can be gathered from existing DOT and FAA
sources or from FAA surveillance activities. For example, data to calculate the percent
outsourced maintenance can be obtained from maintenance expense information provided by the
air carriers to the DOT.

6-4
 TABLE 6-4. PERFORMANCE MEASURES FOR AIRLINES WITH
MAJOR CONTRACTS WITH REPAIR STATIONS

Performance Measure Unit Significance 14 CFR Reference

Percent Outsourced Dollar Increased outsourced DOT Form 41 data
Maintenance cost/ maintenance requires different
ASM organization structure
Company personnel at Number Airline oversight of operation N/A
a repair station
Use of foreign repair Y/N Geographic location may require N/A
station different oversight

6-5/6-6
7. SUMMARY AND CONCLUSIONS.

While the decision to outsource is primarily a cost-driven issue, the performance of the repair
station ultimately dictates the cost savings to an airline. For example, while an airline may
outsource heavier maintenance for a particular fleet type so as not to require investing in training
personnel or obtaining the necessary tools and test equipment, savings may be offset by the loss
of revenue due to cancelled flights because of poor quality work. Ultimately, factors related to
the quality of work of the repair station dictate the cost savings.

There are over 3,000 repair stations currently operating in the United States. Due to the great
deal of variability among these repair stations in terms of scale and scope of services offered, it is
challenging to classify them into discrete categories. In addition, it is difficult to identify
outsourcing practices of airlines. For example, a major airline that outsources auxiliary power
unit overhauls will have a different arrangement with a repair station than does a start-up airline
that outsources its heavy checks.

Likewise, it is difficult to provide boundary values for performance measures and risk indicators
related to repair stations. In some cases, certain indicators may be normalized by expressing
them as ratios (e.g., ratio of inspectors to workforce). Even then, complexity of the repair station
may cause some variation in the interpretation of such a risk indicator.

The most important risk indicators and performance measures for each category include:

• Capability of Repair Station

− Training of employees
− Experience of employees
− Tools and test equipment

• Performance of Repair Station

− Audit procedures
− Ability to meet turntimes
− Number of discrepancies
− SUPs infractions
− Certification infractions

• Administration of Repair Station

− Financial status
− Change in management

Several other performance measures and risk indicators have been presented in this report.
Many of them are correlated to one another. For example, number of certificated maintenance
personnel and number of repairmen are different quantities, but they are highly related to one
another considering the scope and scale of the work performed by a repair station. The relation
of such measures is an area that requires further investigation.

7-1
While most of this information is collected by the FAA and other sources, the quality of the
information may be questionable or not standardized. In addition, many of the performance
measures are not directly obtainable since they are considered proprietary or confidential
information. This further complicates the task of quantitatively rating repair station
performance.

7-2
8. REFERENCES.

1. “FAA’s New Inspection System Offers Promise, but Problems Need to Be Addressed,”
GAO/RCED-99-183, United States General Accounting Office, June 1999.

2. “FAA Oversight of Repair Stations Needs Improvement,” GAO/RCED-98-21, United

States General Accounting Office, October 1997.

3. Gallacher, Jackie, “Third Party Pressure,” Airline Business, March 1999, p.48-50.

4. Phillips, Edward H., “MRO Industry Grappling With Critical Issues,” Aviation Week &
Space Technology, Vol. 150, No. 17, 26 April 1999, p.45.

5. Ebbs, George H., “Supporting Roles,” Airline Business, April 1997, p. 58-60.

6. Birch, Doug, “Good Old-Fashioned Service,” Interavia, November 1998 (A), p. 35-36.

7. “European Maintenance Providers in Short Supply,” Aircraft Economics,

January/February 1999, No. 41, p. 36-39.

8. Birch, Doug, “Wanted: Qualified People,” Interavia, November 1998 (B), p. 47.

9. FAA AC 21-29B, Detecting and Reporting Suspected Unapproved Parts, 1998.

http://www2.faa.gov/avr/sups/standard/cfm

10. FAA AC 00-56, Voluntary Industry Distributor Accreditation Program, 1996.

http://www2.faa.gov/avr/sups/links.cfm

11. O’Brien, Bill, “New Part 145 or What’s New with Repair Stations,”
http://www.faa.gov/avr/afs/news/archive/october/145.htm

12. Goldsby, R.P. and Watson, J., “Comparative Study of Personnel Qualifications and
Training at Aviation Maintenance Facilities,” 1998. http://hfskyway.faa.gov

13. Drury, C.G., Wenner, C., Kritkausky, K., “Development of Process to Improve Work
Documentation of Repair Stations,” 1999, FAA Grant with State University of New York
at Buffalo. http://hfskyway.faa.gov

14. Goldsby, R.P., “Improving Operations and Oversight of Contract Maintenance,” 1999.
http://hfskyway.faa.gov

8-1/8-2
9. BIBLIOGRAPHY.

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p. 33-35.

“Evaluating Maintenance and Spares Costs,” Aircraft Economics, November/December 1998,

No. 40, p. 29-30.

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Yearbook 1998/9 Company Profile, p. 29-31.

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“Allan Dollie, GAMCO,” Aircraft Economics, No. 38, July 1998, p. 12.

“Maintenance Costs Take Their Toll,” Business and Industry, No. 212, December 1998, p. 34.

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Birch, Doug, “OEMs: Partners or Competitors?” Interavia, November 1998, p. 38-44.

Broderick, Sean, “New FAR 145 Problematic, Industry Says.” Aero Safety and Maintenance,
Vol. 3, No. 13, 25 June 1999, p. 1.

Canaday, Henry, “Betting on Embraer’s Regional Jet,” Business and Technology, Vol. V, No. 7,
September/October 1999, p. 35.

Chandler, Jerome Greer, “Unconventional Wisdom,” Overhaul & Maintenance, Vol. V, No. 9,
December 1999, p. 29.

Chuter, Andrew, “Maintenance Directory, Part 3: Europe and the CIS,” Flight International, 30
September – 6 October 1998, p. 32-63.

Ellis, Dominic, “David Arzi, Bedek Aviation Group,” Aircraft Economics, November/December
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Macrae, Duncan, “Repair Stations Under Surveillance,” Interavia, December 1997, p. 41.

McKenna, James T. “Cost-Cutting Propels Reliability Campaigns,” Aviation Week & Space
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McKenna, James T., “FAA Inspection Cites ValuJet Oversight Lapses,” Aviation Week & Space
Technology, 9 March 1998, p. 59.

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& Space Technology, 30 March 1998, p. 72-73.

Montlake, Simon, “FLS Seeks Outsourced Work from European Carriers,” Air Transport
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Nelms, Douglas W., “One-Stop Shopping,” Air Transport World, November 1998, p. 89-95.

Nelms, Douglas W., “Problems to Spare” Air Transport World, November 1998, p. 96-99.

Noble, Martin, “HAECO and TAECO Shrug off Asian Crisis,” Interavia, November 1998, p. 46.

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Proulx, Jim, “NTSB Launches Maintenance Study,” Overhaul & Maintenance, Vol. V, No. 7,
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9-2
 APPENDIX A—INTERVIEW OUTLINES

Airline Interviews

Background Information

Size of Maintenance Operation

What is your total maintenance budget?
How is the budget subdivided?
For line service?
For scheduled checks?
For routine maintenance?
For non-routine maintenance?

What are the areas of major expenditures?

What does 80% of your budget consist of?
What percentage of the total budget is the maintenance budget?

What percent of the maintenance budget is outsourced?

Is there a limit as to how much maintenance can be outsourced?

If so, what is the limit, and who set it?

Typical maintenance functions outsourced

Which functions are likely to be outsourced?
Line service
Scheduled checks
Light (A,B)
Heavy checks (C,D)
Component/System Overhaul
Engine
Others?
Why are these functions outsourced?
Cost?
Special equipment/tooling required?
Special labor skills?
Others?

Outsourcing providers
What kinds of providers do you employ?
Repair Stations?
Component shops?
FBOs?
Other airlines?
Others?

A-1
Criteria for Third Party Maintenance Providers

Identifying potential providers

How do you identify potential providers?
Research?
CASE Audit?
Advertisements?
Request for bid?
Interview/site visits?

Who do you consider the top-rated providers?

For line service?
For component overhaul?
For engine shops?
For heavy checks?
Others?

Do you consider foreign repair stations the same as domestic ones?

What are the differences between foreign and domestic repair stations?
Do they require special oversight on your part?

Requirements of provider
Do you require special insurance coverage as part of the contract?

Do you consult the principal maintenance inspector of a potential provider?

What type of information do you ask them?
FAA actions?

Do you consider the make-up of the workforce?

Union versus nonunion?
If a school is connected to the provider?
Certificated versus uncertificated?
Percentage of certificated employees?
Specialization (repairmen certificates)?
Employee turnover?
Workload?
Wages?

How are regulations considered?

EPA?
OSHA?

What factors are considered for the aircraft while on site of the provider?
Does the aircraft have to be kept in a hangar or can the work be performed
outside?

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 Is security an issue?

Do you consider the financial status of the provider?

Credit check?
Solvency?

Requirements of contractor
Does the potential provider have any requirements of the contractor?
On-site personnel?
Documentation of aircraft?
Documentation of procedures?

Decision making process

What are the most important criteria in comparing bids from providers?
Cost
Performance
Guarantees

Awarding contracts
When a contract is awarded, what language is written into the contract to ensure
performance of the provider?

What is the typical period of performance?

Number of aircraft the contract covers?

Is the contract ever modified?

Monitoring and Assessing Performance

Company Issues
How important is it to you if a contract maintenance facility is undergoing
a change in management?
bankruptcy proceedings?
extensive growth?

Personnel
Are company personnel on-site at the third party provider?
If so, how large is the contract?
How many personnel?
Who are the personnel on-site?
Are the personnel on-site company employees?
What is their function while on-site?

If not, how is performance monitored?

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Performance Measures
What data is collected from the provider, about the provider while under contract?
Physical/service oriented?
Economic?
Personnel?
Workload?
FAA actions?

What data would be useful to have, but is not collected?

What data is considered proprietary?

Which of the criteria used in deciding to award the contract to the provider is still
monitored while the provider is under contract?

What documentation is required while the provider is under contract?

About the aircraft?
About procedures?
About compliance with company set policies?
About compliance with FAA regulations?
Other?

In what format is this documentation delivered?

Paper?
Electronic?
Other?

How is quality assurance monitored while the aircraft (or components of the aircraft) is at
the facility of the provider?
How do you ensure proper materials are being used?
How do you ensure against suspected unapproved parts?
How do you ensure that established procedures are being followed?

Is the work of a provider audited?

If so, how?

Are there any special inspections or procedures that are completed after the aircraft has
returned from the provider?

How is post delivery performance monitored?

Renewal of contract
What criteria are most important to evaluate when renewing a contract?

What criteria are least important when renewing a contract?

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Termination of contract
For what reasons are a contract terminated?
Is a contract termination reported to the FAA or any other entity?

Oversight by Other Entities

CASE
How much do you rely on CASE audits for information about the performance of a third
party provider?

What information do you still collect on your own?

Industry Groups
Do industry groups provide any guidance regarding outsourcing maintenance?

Do industry groups provide a forum in which to share information about repair stations
and other third party providers?

FAA
How do you ensure compliance with FAA regulations?

Do you coordinate with the local PMI of the provider?

How are you involved if the FAA is conducting a routine or non-routine inspection of the
providers facility?

Are you notified if the FAA pulls/revokes/suspends a 145 certificate? If yes, how soon?

Repair Station Interview

Background Information

Certification List (US) (checklist)

Non US Certifications and governing bodies held
Date of certification
Capacity (in terms of hangar space, ability to accommodate aircraft)
Number of employees (by certification)
Revenue generated (how do break this out?)

Makes of aircraft serviced

Components/systems serviced

Satellite locations (percent work within company divisions)

Geographic authorization
Non-certificated outside sources used and type of work?

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Labor and Management Issues

Structure of operations
How many shifts are currently scheduled?
What are typical work hours?
Is the workforce union or non-union?
What is your average wage for personnel?
What is your inspector to work-force ratio?

Qualifications of AMTs
What percent of your workforce are certificated?
What percent of your workforce is temporary?
What is their typical experience, training, skills?
How do you verify background?
Is there a language requirement (English)?

Hiring AMTs
What are sources of personnel (permanent)?
What are sources of personnel (temporary)?
What are the most important qualities for new AMTs?
Experience
Training
Certification

Promotion and retention of personnel

What is the company policy on advancement into inspection/supervision?
What training programs are provided?
How do you track training or qualifications of personnel?

Turnover of labor and management

Is there a shortage of personnel?
What is the turnover rate of personnel? What are the reasons for this?
How many open positions are there currently of
AMTs?
Inspectors?
Supervisors?
How many management changes have occurred since being certified?

Certification/Regulatory Issues

Differences between the manner maintenance is performed due to

certification the work is being performed under?
different customers?

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Are documentation errors common?
Would a one manual concept between FAA/JAA increase quality and lessen
documentation errors?

How often are inconsistent policy or regulatory interpretations made by the FAA or other
cognizant agencies?
What are the most common difficulties?

Do you have any opinions regarding the proposed revision of FAR Part 145?

Can you suggest helpful changes in regulatory requirements?

What are the most controversial issues facing repair stations today?

What information could be provided by FAA or industry that would helpful to you?

Relationships with Clients

What is the typical contract period?

Have you ever terminated a contract prematurely?

Do you have any requirements of the client when under contract with them?

Do you require a representative from your client to be on-site?

If yes, when?
What is their function?

What information is passed between you and the client while under contract?

Use of Subcontractors

Do you use subcontractors?

In what instances?
What kinds of entities?
If uncertificated, in what instance?

How do you choose subcontractors?

How do you monitor their performance?
Do you ever consult their PMI?
Would your primary client ever be aware that you use a subcontractor?

Quality Control Issues

What are sources of technical information are available?

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How do you reconcile documentation and/or procedures that may be different between clients or
from company established procedures?

How many times are supplier/vendors audited?

Are they scheduled in advance?
What is the process for special audits?

How often are audits performed internally?

How is your quality assurance department organized?

What quality assurance systems in place?

SAE AS7103 and AS7104
ISO 9000
ASA 100

How often are you inspected by

FAA?
CASE?
Other government agencies?
Clients?

How is tracking of spare parts accomplished?

Please describe parts documentation system for the following:

Sources of parts
FAA Form 8130
JAA Form One
SUPs Detection
Parts scrapping programs

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 APPENDIX B—FAR PART 145 REFERENCES

(Note: This is the version of FAR Part 145 that is current as of February 28, 2002.)

Sec. 145.2 Performance of maintenance, preventive maintenance, alterations

and required inspections for an air carrier or commercial operator under
the continuous airworthiness requirements of Parts 121 and 127, and for
airplanes under the inspection program required by Part 125.

(a) Each repair station that performs any maintenance, preventive

maintenance, alterations, or required inspections for an air carrier or
commercial operator having a continuous airworthiness program under Part 121
or Part 127 of this chapter shall comply with Subpart L of Part 121 (except
Secs. 121.363, 121.369, 121.373, and 121.379) or Subpart I of Part 127
(except Secs. 127.131, 127.134, 127.136, and 127.140) of this chapter, as
applicable. In addition, such repair station shall perform that work in
accordance with the air carrier’s or commercial operator’s manual.
(b) Each repair station that performs inspections on airplanes governed by
Part 125 of this chapter shall do that work in accordance with the inspection
program approved for the operator of the airplane.

[Amdt. 145-7, 31 FR 10614, Aug. 9, 1966, as amended by Amdt. 145-17, 45 FR

67235, Oct. 9, 1980]

Sec. 145.31 Ratings.

The following ratings are issued under this subpart:

(a) Airframe ratings. (1) Class 1: Composite construction of small
aircraft.
(2) Class 2: Composite construction of large aircraft.
(3) Class 3: All-metal construction of small aircraft.
(4) Class 4: All-metal construction of large aircraft.
(b) Powerplant ratings. (1) Class 1: Reciprocating engines of 400
horsepower or less.
(2) Class 2: Reciprocating engines of more than 400 horsepower.
(3) Class 3: Turbine engines.
(c) Propeller ratings. (1) Class 1: All fixed pitch and ground adjustable
propellers of wood, metal, or composite construction.
(2) Class 2: All other propellers, by make.
(d) Radio ratings. (1) Class 1: Communication equipment: Any radio
transmitting equipment or receiving equipment, or both, used in aircraft to
send or receive communications in flight, regardless of carrier frequency or
type of modulation used; including auxiliary and related aircraft interphone
systems, amplifier systems, electrical or electronic inter-crew signaling
devices, and similar equipment; but not including equipment used for
navigation of the aircraft or as an aid to navigation, equipment for

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measuring altitude or terrain clearance, other measuring equipment operated
on radio or radar principles, or mechanical, electrical, gyroscopic, or
electronic instruments that are a part of communications radio equipment.
(2) Class 2: Navigational equipment: Any radio system used in aircraft for
en route or approach navigation, except equipment operated on radar or pulsed
radio frequency principles, but not including equipment for measuring
altitude or terrain clearance or other distance equipment operated on radar
or pulsed radio frequency principles.
(3) Class 3: Radar equipment: Any aircraft electronic system operated on
radar or pulsed radio frequency principles.
(e) Instrument ratings. (1) Class 1: Mechanical: Any diaphragm, bourdon
tube, aneroid, optical, or mechanically driven centrifugal instrument that is
used on aircraft or to operate aircraft, including tachometers, airspeed
indicators, pressure gauges drift sights, magnetic compasses, altimeters, or
similar mechanical instruments.
(2) Class 2: Electrical: Any self-synchronous and electrical indicating
instruments and systems, including remote indicating instruments, cylinder
head temperature gauges, or similar electrical instruments.
(3) Class 3: Gyroscopic: Any instrument or system using gyroscopic
principles and motivated by air pressure or electrical energy, including
automatic pilot control units, turn and bank indicators, directional gyros,
and their parts, and flux gate and gyrosyn compasses.
(4) Class 4: Electronic: Any instruments whose operation depends on
electron tubes, transistors, or similar devices including capacitance type
quantity gauges, system amplifiers, and engine analyzers.
(f) Accessory ratings. (1) Class 1: Mechanical accessories that depend on
friction, hydraulics, mechanical linkage, or pneumatic pressure for
operation, including aircraft wheel brakes, mechanically driven pumps,
carburetors, aircraft wheel assemblies, shock absorber struts and hydraulic
servo units.
(2) Class 2: Electrical accessories that depend on electrical energy for
their operation, and generators, including starters, voltage regulators,
electric motors, electrically driven fuel pumps magnetos, or similar
electrical accessories.
(3) Class 3: electronic accessories that depend on the use of an electron
tube transistor, or similar device, including supercharger, temperature, air
conditioning controls, or similar electronic controls.

Sec. 145.33 Limited ratings.

(a) Whenever the Administrator finds it appropriate, he may issue a limited

rating to a domestic repair station that maintains or alters only a
particular type of airframe, powerplant, propeller, radio, instrument, or
accessory, or parts thereof, or performs only specialized maintenance
requiring equipment and skills not ordinarily found in regular repair
stations. Such a rating may be limited to a specific model aircraft, engine,

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or constituent part, or to any number of parts made by a particular
manufacturer.
(b) Limited ratings are issued for--
(1) Airframes of a particular make and model;
(2) Engines of a particular make and model;
(3) Propellers of a particular make and model;
(4) Instruments of a particular make and model;
(5) Radio equipment of a particular make and model;
(6) Accessories of a particular make and model;
(7) Landing gear components;
(8) Floats, by make;
(9) Nondestructive inspection, testing, and processing;
(10) Emergency equipment;
(11) Rotor blades, by make and model;
(12) Aircraft fabric work; and
(13) Any other purpose for which the Administrator finds the applicant’s
request is appropriate.
(c) For a limited rating for specialized services, the operations
specifications of the station shall contain the specification used in
performing that specialized service. The specification may either be a civil
or military one that is currently used by industry and approved by the
Administrator or one developed by the applicant and approved by the
Administrator.

Sec. 145.35 Housing and facility requirements.

(a) An applicant for a domestic repair station certificate and rating, or

for an additional rating, must comply with paragraphs (b) to (h) of this
section and provide suitable--
(1) Housing for its necessary equipment and material;
(2) Space for the work for which it seeks a rating;
(3) Facilities for properly storing, segregating, and protecting materials,
parts, and supplies; and
(4) Facilities for properly protecting parts and subassemblies during
disassembly, cleaning, inspection, repair, alteration, and assembly;

so that work being done is protected from weather elements, dust, and heat;
workers are protected so that the work will not be impaired by their physical
efficiency; and maintenance operations have efficient and proper facilities.
(b) The applicant must provide suitable shop space where machine tools and
equipment are kept and where the largest amount of bench work is done. The
shop space need not be partitioned but machines and equipment must be
segregated whenever--
(1) Machine or woodwork is done so near an assembly area that chips or
material might inadvertently fall into assembled or partially assembled work;

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 (2) Unpartitioned parts cleaning units are near other operations;
(3) Fabric work is done in an area where there are oils and greases;
(4) Painting or spraying is done in an area so arranged that paint or paint
dust can fall on assembled or partially assembled work;
(5) Paint spraying, cleaning, or machining operations are done so near
testing operations that the precision of test equipment might be affected;
and
(6) In any other case the Administrator determines it is necessary.
(c) The applicant must provide suitable assembly space in an enclosed
structure where the largest amount of assembly work is done. The assembly
space must be large enough for the largest item to be worked on under the
rating he seeks and must meet the requirements of paragraph (a) of this
section.
(d) The applicant must provide suitable storage facilities used exclusively
for storing standard parts, spare parts, and raw materials, and separated
from shop and working space. He must organize the storage facilities so that
only acceptable parts and supplies will be issued for any job, and must
follow standard good practices for properly protecting stored materials.
(e) The applicant must store and protect parts being assembled or
disassembled, or awaiting assembly or disassembly, to eliminate the
possibility of damage to them.
(f) The applicant must provide suitable ventilation for his shop, assembly,
and storage areas so that the physical efficiency of his workers is not
impaired.
(g) The applicant must provide adequate lighting for all work being done so
that the quality of the work is not impaired.
(h) The applicant must control the temperature of the shop and assembly
area so that the quality of the work is not impaired. Whenever special
maintenance operations are being performed, such as fabric work or painting,
the temperature and humidity control must be adequate to insure the
airworthiness of the article being maintained.

Sec. 145.39 Personnel requirements.

(a) An applicant for a domestic repair station certificate and rating, or

for an additional rating, must provide adequate personnel who can perform,
supervise, and inspect the work for which the station is to be rated. The
officials of the station must carefully consider the justifications and
abilities of their employees and shall determine the abilities of its
uncertificated employees performing maintenance operations on the basis of
practical tests or employment records. The repair station is primarily
responsible for the satisfactory work of its employees.
(b) The number of repair station employees may vary according to the type
and volume of its work. However, the applicant must have enough properly
qualified employees to keep up with the volume of work in process, and may

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 not reduce the number of its employees below that necessary to efficiently
produce airworthy work.
(c) Each repair station shall determine the abilities of its supervisors
and shall provide enough of them for all phases of its activities. However,
the Administrator may determine the ability of any supervisor by inspecting
his employment and experience records or by a personal test. Each supervisor
must have direct supervision over working groups but need not have over-all
supervision at management level. Whenever apprentices or students are used in
working groups on assemblies or other operations that might be critical to
the aircraft, the repair station shall provide at least one supervisor for
each 10 apprentices or students, unless the apprentices or students are
integrated into groups of experienced workers.
(d) Each person who is directly in charge of the maintenance functions of a
repair station must be appropriately certificated as a mechanic or repairman
under Part 65 of this chapter and must have had at least 18 months of
practical experience in the procedures, practices, inspection methods,
materials, tools, machine tools, and equipment generally used in the work for
which the station is rated. Experience as an apprentice or student mechanic
may not be counted in computing the 18 months of experience. In addition, at
least one of the persons so in charge of maintenance functions for a station
with an airframe rating must have had experience in the methods and
procedures prescribed by the Administrator for returning aircraft to service
after 100-hour, annual, and progressive inspections.
(e) Each limited repair station shall have employees with detailed
knowledge of the particular maintenance function or technique for which it is
rated, based on attending a factory school or long experience with the
product or technique involved.

Sec. 145.43 Records of supervisory and inspection personnel.

(a) Each applicant for a domestic repair station certificate and rating, or
for an additional rating, must have, and each certificated domestic repair
station shall maintain, a roster of--
(1) Its supervisory personnel, including the names of the officials of the
station that are responsible for its management and the names of its
technical supervisors, such as foreman and crew chiefs; and
(2) Its inspection personnel, including the names of the chief inspector
and those inspectors who make final airworthiness determinations before
releasing an article to service.
(b) The station shall also provide a summary of the employment of each
person whose name is on the roster. The summary must contain enough
information as to each person on the roster to show compliance with the
experience requirements of this subpart, including--
(1) His present title (e.g., chief inspector, metal shop foreman, etc.);
(2) His total years of experience in the type of work he is doing;

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 (3) His past employment record, with names of places and term of employment
by month, and year;
(4) The scope of his present employment (e.g., airframe overhaul, airframe
final assembly, engine inspection, department, etc.); and
(5) The type and number of the mechanic or repairman certificate that he
holds, and the ratings on that certificate.
(c) The station shall change the roster, as necessary, to reflect--
(1) Terminating the employment of any person whose name is on the roster;
(2) Assigning any person to duties that require his name to be carried on
the roster; or
(3) Any appreciable change in the duties and scope of assignment of any
person whose name is on the roster.
(d) The station shall keep the roster and employment summaries required by
this section, subject to inspection by the Administrator upon his request.
(e) A domestic repair station may not use the services of a person directly
in charge of maintenance or alteration unless it keeps current records on him
as required by this section.

[Doc. No. 1157, 27 FR 6662, June 13, 1962, as amended by Amdt. 145-5, 31 FR
8585, June 21, 1966; Amdt. 145-15, 41 FR 47230, Oct. 28, 1976]

Sec. 145.49 Equipment and materials: Limited rating.

(a) An applicant for a limited rating (other than specialized services)

under Sec. 145.33, must have the equipment and materials to perform any job
function appropriate to the rating and class specified in Sec. 145.47 for the
rating he seeks. However, he need not be equipped for a function that does
not apply to the particular make or model article for which he seeks a
rating, if he shows that it is not necessary under the recommendations of the
manufacturer of the article.
(b) An applicant for a rating for specialized services or techniques under
Sec. 145.33 must--
(1) For magnetic and penetrant inspection, have the equipment and materials
for wet and dry magnetic inspection techniques, residual and continuous
methods, and portable equipment for the inspection of welds both on and off
the aircraft;
(2) For emergency equipment maintenance, have the equipment and materials
to perform inspections, repairs, and tests of all kinds of inflated
equipment, the re-packing, re-marking, re-sealing, and re-stocking of life
rafts, and the weighing, refilling, and testing of carbon dioxide fire
extinguishers and oxygen containers;
(3) For rotor blade maintenance, have the equipment, materials, and
technical data recommended by the manufacturer; and
(4) For aircraft fabric work, have the equipment and materials to apply
protective coatings to structures, machine stitch fabric panels, perform
covering, sewing, and rib stitching operations, apply dope and paint using

B-6
temperature and humidity control equipment, install patches, grommets, tapes,
hooks, and similar equipment, and refinish entire aircraft and aircraft
parts.

Sec. 145.45 Inspection systems.

(a) An applicant for a repair station certificate, and rating or for an

additional rating, must have an inspection system that will produce
satisfactory quality control and conform to paragraphs (b) to (f) of this
section.
(b) The applicant’s inspection personnel must be thoroughly familiar with
all inspection methods, techniques, and equipment used in their specialty to
determine the quality or airworthiness of an article being maintained or
altered. In addition, they must--
(1) Maintain proficiency in using various inspection aids intended for that
purpose;
(2) Have available and understand current specifications involving
inspection tolerances, limitations, and procedures established by the
manufacturer of the product being inspected and with other forms of
inspection information such as FAA airworthiness directives and bulletins;
and
(3) In cases where magnetic, fluorescent, or other forms of mechanical
inspection devices are to be used, be skilled in operating that equipment and
be able to properly interpret defects indicated by it.
(c) The applicant must provide a satisfactory method of inspecting incoming
material to insure that, before it is placed in stock for use in an aircraft
or part thereof, it is in a good state of preservation and is free from
apparent defects or malfunctions.
(d) The applicant must provide a system of preliminary inspection of all
articles he maintains to determine the state of preservation or defects. He
shall enter the results of each inspection on an appropriate form supplied by
it and keep the form with the article until it is released to service.
(e) The applicant must provide a system so that before working on any
airframe, powerplant, or part thereof that has been involved in an accident,
it will be inspected thoroughly for hidden damage, including the areas next
to the obviously damaged parts. He shall enter the results of this inspection
on the inspection form required by paragraph (d) of this section.
(f) At the time he applies for a repair station certificate, the applicant
must provide a manual containing inspection procedures, and thereafter
maintain it in current condition at all times. The manual must explain the
internal inspection system of the repair station in a manner easily
understood by any employee of the station. It must state in detail the
inspection requirements in paragraphs (a) to (e) of this section, and the
repair station’s inspection system including the continuity of inspection
responsibility, samples of inspection forms, and the method of executing
them. The manual must refer whenever necessary to the manufacturer’s

B-7
inspection standards for the maintenance of the particular article. The
repair station must give a copy of the manual to each of its supervisory and
inspection personnel and make it available to its other personnel. The repair
station is responsible for seeing that all supervisory and inspection
personnel thoroughly understand the manual.

[Doc. No. 1157, 27 FR 6662, June 13, 1962, as amended by Amdt. 145-15, 41 FR
47230, Oct. 28, 1976]

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